Download Offshoring, Low-skilled Immigration and Labor Market Polarization

Offshoring, Low-skilled Immigration and Labor Market
Polarization
Federico S. Mandelman and Andrei Zlate
Discussion by Rosario Crinò (Catholic University of Milan, CEPR and CESifo)
International Trade and Macroeconomic Interdependence in the Age of
Global Value Chains
Bank of Lithuania, September 15-16 2016
Outline of the discussion
◦ Summary of the paper.
◦ Overview of the main features.
◦ Some questions and comments:
model;
data and calibration;
motivation and interpretation of the results.
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration.
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration. → Mechanism:
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration. → Mechanism:
◦ offshoring ↑ employment and wages in high-skill jobs and ↓ them in medium-skill jobs;
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration. → Mechanism:
◦ offshoring ↑ employment and wages in high-skill jobs and ↓ them in medium-skill jobs;
→ demand for low-skill, non-tradable, services by high-skill workers ↑;
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration. → Mechanism:
◦ offshoring ↑ employment and wages in high-skill jobs and ↓ them in medium-skill jobs;
→ demand for low-skill, non-tradable, services by high-skill workers ↑;
→ low-skill wages ↑, attracting immigrant workers;
Summary of the paper
Motivation
Asymmetric patterns of polarization across employment and wages in the U.S.:
◦ employment → decreased in medium-skill jobs, increased in high- and low-skill jobs;
◦ wages → increased sharply in high-skill occupations, stagnated in low-skill jobs.
Proposed explanation
Rise of offshoring and low-skill migration. → Mechanism:
◦ offshoring ↑ employment and wages in high-skill jobs and ↓ them in medium-skill jobs;
→ demand for low-skill, non-tradable, services by high-skill workers ↑;
→ low-skill wages ↑, attracting immigrant workers;
→ higher supply of low-skill labor dampens the increase in low-skill wages.
Summary of the paper
Model
Three-country stochastic growth model:
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
endogenous offshoring → most efficient workers perform tasks for global market;
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
endogenous offshoring → most efficient workers perform tasks for global market;
shocks to transport costs → affect selection of workers into offshoring.
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
endogenous offshoring → most efficient workers perform tasks for global market;
shocks to transport costs → affect selection of workers into offshoring.
◦ South:
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
endogenous offshoring → most efficient workers perform tasks for global market;
shocks to transport costs → affect selection of workers into offshoring.
◦ South:
migration decision → determined endogenously from HH problem;
Summary of the paper
Model
Three-country stochastic growth model:
◦ Home and Foreign (symmetric):
traded sector → trade in tasks and endogenous training by households;
non-traded sector → only unskill labor (native and immigrant);
complementarity in consumption of goods and services;
endogenous offshoring → most efficient workers perform tasks for global market;
shocks to transport costs → affect selection of workers into offshoring.
◦ South:
migration decision → determined endogenously from HH problem;
shocks to sunk migration costs → affect migration choices.
Summary of the paper
Calibration and estimation
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
◦ Welfare implications
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
◦ Welfare implications → offshoring and migration increase welfare through:
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
◦ Welfare implications → offshoring and migration increase welfare through:
specialization in more productive tasks;
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
◦ Welfare implications → offshoring and migration increase welfare through:
specialization in more productive tasks;
task upgrading by natives (higher productivity);
Summary of the paper
Calibration and estimation
◦ Bayesian estimation
◦ Quarterly data on per-capita GDP in U.S., Mexico and RoW; U.S. border patrol hours
Results
◦ Model qualitatively reproduces changes in employment and wage distributions
◦ Welfare implications → offshoring and migration increase welfare through:
specialization in more productive tasks;
task upgrading by natives (higher productivity);
lower prices of services.
Main strengths
◦ Important topic, not much studied in the literature
◦ Intuitive and plausible story
◦ Elegant dynamic model, realistic formulations for key variables (e.g., offshoring decision)
◦ Thorough calibration
◦ Well written and pleasant to read
Main strengths
Contribution
Compared with reduced-form empirics, dynamic macro model allows to:
◦ endogenize and microfound offshoring and migration choices;
◦ endogenize training decisions (changes in skill distribution) after trade/migration shocks;
◦ study welfare implications of offshoring and migration.
Questions on the model
◦ Consumption of non-traded services in Home → why only domestic HH? Not also
immigrants?
Questions on the model
◦ Consumption of non-traded services in Home → why only domestic HH? Not also
immigrants?
◦ Consumption basket in the South → why includes final good imported from Home?
Questions on the model
◦ Consumption of non-traded services in Home → why only domestic HH? Not also
immigrants?
◦ Consumption basket in the South → why includes final good imported from Home?
◦ Return migration → endogenize?
Suggestions on data and calibration
◦ Alternative proxies for migration costs and flows
Suggestions on data and calibration
◦ Alternative proxies for migration costs and flows
◦ Trade in intermediates and services (offshoring) to validate the model?
Suggestions on data and calibration
◦ Alternative proxies for migration costs and flows
◦ Trade in intermediates and services (offshoring) to validate the model?
◦ Robustness checks with alternative parameter values (fo , θ, k)
Suggestions on data and calibration
◦ Alternative proxies for migration costs and flows
◦ Trade in intermediates and services (offshoring) to validate the model?
◦ Robustness checks with alternative parameter values (fo , θ, k)
◦ Alternative correlation structures for shocks (e.g., correlated demand and technology
shocks)
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014)
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
◦ Offshoring concept
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
◦ Offshoring concept → alternative interpretation based on export opportunities?
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
◦ Offshoring concept → alternative interpretation based on export opportunities?
◦ Discuss changes in native employment by skill group after offshoring shock
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
◦ Offshoring concept → alternative interpretation based on export opportunities?
◦ Discuss changes in native employment by skill group after offshoring shock
◦ Polarization of non-native employment distribution
Motivation and interpretation of the results
◦ Emphasis on asymmetric polarization → yet, model consistent with both employment
and wage polarization
◦ Quantitative relevance of proposed explanation (would be useful to assess)
◦ Alternative explanation: SBTC (Autor and Dorn, AER 2013; Goos et al, AER 2014) →
compare quantitatively?
◦ Offshoring concept → alternative interpretation based on export opportunities?
◦ Discuss changes in native employment by skill group after offshoring shock
◦ Polarization of non-native employment distribution → is model consistent with it?