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Offshoring, Automation, Low-Skilled Immigration, and Labor Market Polarization

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  • Federico S. Mandelman
  • Andrei Zlate

Abstract

We show that the observed polarization of employment toward the high- and low-skill occupations disappears when only native workers are considered. Instead, low-skilled immigration explains employment growth at the low tail of the skill distribution. Moreover, while employment rose, wages remained subdued in low-skill occupations. A data-disciplined structural model accounts for this evidence: Offshoring and automation negatively affect middle-skill occupations but enhance employment and wages for the high-skilled. Low-skill employment is sheltered from offshoring and automation, as it consists of manual, non-tradable services. However, low-skilled immigration depresses low-skill wages and encourages native workers to move into skilled occupations through training.

Suggested Citation

  • Federico S. Mandelman & Andrei Zlate, 2022. "Offshoring, Automation, Low-Skilled Immigration, and Labor Market Polarization," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 355-389, January.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:1:p:355-89
    DOI: 10.1257/mac.20180205
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    References listed on IDEAS

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    Cited by:

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    3. Ghodsi, Mahdi & Stehrer, Robert & Barišić, Antea, 2024. "Which migrant jobs are linked with the adoption of novel technologies, robotisation, and digitalisation?," Technology in Society, Elsevier, vol. 78(C).
    4. Patel, Pankaj C., 2023. "Automation vulnerability, voting, and self-employment," Journal of Business Venturing Insights, Elsevier, vol. 19(C).
    5. Mann, Katja & Pozzoli, Dario, 2022. "Automation and Low-Skill Labor," IZA Discussion Papers 15791, Institute of Labor Economics (IZA).
    6. Wang, Linhui & Cao, Zhanglu & Dong, Zhiqing, 2023. "Are artificial intelligence dividends evenly distributed between profits and wages? Evidence from the private enterprise survey data in China," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 342-356.
    7. Firooz, Hamid & Leduc, Sylvain & Liu, Zheng, 2025. "Reshoring, automation, and labor markets under trade uncertainty," Journal of International Economics, Elsevier, vol. 156(C).
    8. Jiang, Zhe (Jasmine), 2023. "‘Multinational Firms’ Sourcing Decisions and Wage Inequality: A Dynamic Analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    9. Brey, Björn, 2024. "The effect of recent technological change on US immigration policy," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    10. Michal Burzynski, 2024. "Spatial and Occupational Mobility of Workers Due to Automation," LISER Working Paper Series 2024-04, Luxembourg Institute of Socio-Economic Research (LISER).
    11. Javed, Mohsin, 2023. "Robots, Natives and Immigrants in US local labor markets," Labour Economics, Elsevier, vol. 85(C).
    12. Bennett, Patrick & Johnsen, Julian V., 2025. "Intersecting Shocks: The Combined Labor Market Impacts of Automation and Immigration," IZA Discussion Papers 18218, Institute of Labor Economics (IZA).
    13. Antea Barišić & Mahdi Ghodsi & Michael Landesmann, 2024. "Technological Push and Pull Factors of Bilateral Migration," wiiw Working Papers 242, The Vienna Institute for International Economic Studies, wiiw.
    14. Mann, Katja & Pozzoli, Dario, 2024. "Robots and immigration," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).

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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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