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Offshoring, immigration, and the native wage distribution

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  • William W. Olney

Abstract

This paper presents a simple model that examines the impact of offshoring and immigration on wages and tests these predictions using U.S. state‐industry‐year panel data. According to the model, the productivity effect causes offshoring to have a more positive impact on low‐skilled wages than immigration, but this gap decreases with the workers’ skill level. The empirical results confirm both of these predictions and thus present direct evidence of the productivity effect. Furthermore, the results provide important insight into how specific components of offshoring and immigration affect the wages of particular types of native workers. Ce texte présente un modèle simple qui examine l’impact de la délocalisation et de l’immigration sur les salaires et teste ses prédictions en utilisant des données de panel pour l’état américain, l’industrie et l’année aux Etats‐Unis. Selon le modèle, l’effet de productivité fait que la délocalisation a un effet positif plus important que l’immigration sur les salaires des travailleurs faiblement qualifiés, mais cet écart décroît à propoprtion que le niveau de qualification des travailleurs s’accroît. Les résultats empiriques confirment ces prédictions et fournissent un support direct pour l’effet de productivité. De plus, les résultats jettent un éclairage important sur la façon dont les composantes spécifiques de la délocalisation et de l’immigration affectent les salaires des travailleurs dans le pays de référence.

Suggested Citation

  • William W. Olney, 2012. "Offshoring, immigration, and the native wage distribution," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 830-856, August.
  • Handle: RePEc:wly:canjec:v:45:y:2012:i:3:p:830-856
    DOI: 10.1111/j.1540-5982.2012.01717.x
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    Cited by:

    1. Gianmarco I. P. Ottaviano & Giovanni Peri & Greg C. Wright, 2021. "Immigration, Offshoring, and American Jobs," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 10, pages 291-326, World Scientific Publishing Co. Pte. Ltd..
    2. Peter J. Montiel & Luis Servén, 2008. "Real Exchange Rates, Saving and Growth: Is there a Link?," Department of Economics Working Papers 2010-18, Department of Economics, Williams College.
    3. William W. Olney & Dario Pozzoli, 2021. "The Impact of Immigration on Firm-Level Offshoring," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 177-195, March.
    4. Sparber, Chad, 2019. "Substitution between groups of highly-educated, foreign-born, H-1B workers," Labour Economics, Elsevier, vol. 61(C).
    5. Matilde Cardoso & Pedro Cunha Neves & Oscar Afonso & Elena Sochirca, 2021. "The effects of offshoring on wages: a meta-analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 149-179, February.
    6. Charles M. Beach, 2016. "Changing income inequality: A distributional paradigm for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1229-1292, November.
    7. Nicholas Sly & Lindsay Oldenski & Brian Kovak, 2017. "The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies," 2017 Meeting Papers 535, Society for Economic Dynamics.
    8. Vallizadeh E. & Muysken J. & Ziesemer T.H.W., 2015. "Offshoring of medium-skill jobs, polarization, and productivity effect: Implications for wages and low-skill unemployment," MERIT Working Papers 2015-004, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2016. "Offshoring Medium-Skill Tasks, Low-Skill Unemployment and the Skill-Wage Structure," MPRA Paper 75581, University Library of Munich, Germany.
    10. Firsin, Oleg, 2023. "How does offshoring affect the wage impact of immigration?," Economic Modelling, Elsevier, vol. 121(C).

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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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