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Immigration, Offshoring and American Jobs

  • Gianmarco I. P. Ottaviano
  • Giovanni Peri
  • Greg C. Wright

How do offshoring and immigration affect the employment of native workers? What kinds of jobs suffer, or benefit, most from the competition created by offshore and immigrant workers? In contrast to the existing literature that has mostly looked at the effects of offshoring and immigration separately, we argue that one can gain useful insights by jointly investigating the interactions among native, immigrant and offshore workers. We develop our argument in three steps. First, we present some new facts on 58 U.S. manufacturing industries from 2000 to 2007. Second, we build on Grossman and Rossi-Hansberg (2008) to design a model of task assignment among heterogeneous native, immigrant and offshore workers that fits those facts. Third, we use the model to draw systematic predictions about the effects of immigration and offshoring on native workers and we test these predictions on the data. We find that, within the manufacturing sector, immigrants do not compete much with natives, as these two groups of workers are relatively specialized in tasks at opposite ends of the skill intensity spectrum. Offshore workers, on the other hand, seem to be specialized in tasks of intermediate skill intensity. We also find that offshoring has no effect on native employment in the aggregate, while the effect of immigration on native employment is positive. This hints at the presence of a "productivity effect" whereby offshoring and immigration improve industry efficiency, thereby creating new jobs.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1147.

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Date of creation: May 2012
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Handle: RePEc:cep:cepdps:dp1147
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Kristin F. Butcher & John DiNardo, 1998. "The Immigrant and Native-born Wage Distributions: Evidence from United States Censuses," NBER Working Papers 6630, National Bureau of Economic Research, Inc.
  2. Monte, Ferdinando, 2009. "Skill Bias, Trade, and Wage Dispersion," MPRA Paper 14719, University Library of Munich, Germany.
  3. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2005. "Offshoring in a Knowledge Economy," Discussion Papers 04-020, Stanford Institute for Economic Policy Research.
  4. Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Center for Development Economics 2010-02, Department of Economics, Williams College.
  5. Giorgio Barba Navaretti & Giuseppe Bertola & Alessandro Sembenelli, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," Development Working Papers 245, Centro Studi Luca d\'Agliano, University of Milano.
  6. Gianmarco I P Ottaviano & Giovanni Peri, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," Working Papers 2008.77, Fondazione Eni Enrico Mattei.
  7. Franziska Ohnsorge & Daniel Trefler, 2004. "Sorting It Out: International Trade and Protection With Heterogeneous Workers," NBER Working Papers 10959, National Bureau of Economic Research, Inc.
  8. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc.
  9. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  10. Chassamboulli, Andri & Palivos, Theodore, 2010. ""Give me your Tired, your Poor," so I can Prosper: Immigration in Search Equilibrium," MPRA Paper 32379, University Library of Munich, Germany.
  11. Giovanni Peri & Chad Sparber, 2008. "Task Specialisation, Immigration and Wages," Development Working Papers 252, Centro Studi Luca d\'Agliano, University of Milano.
  12. Barry R. Chiswick & Yew Liang Lee & Paul W. Miller, 2005. "Immigrant Earnings: A Longitudinal Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 485-503, December.
  13. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November.
  14. Becker, Sascha & Ekholm, Karolina & Muendler, Marc-Andreas, 2012. "Offshoring and the Onshore Composition of Tasks and Skills," CAGE Online Working Paper Series 97, Competitive Advantage in the Global Economy (CAGE).
  15. Giovanni Peri, 2009. "The Effect of Immigration on Productivity: Evidence from US States," NBER Working Papers 15507, National Bureau of Economic Research, Inc.
  16. Alan Manning, 2004. "We can work it out: the impact of technological change on the demand for low skill workers," LSE Research Online Documents on Economics 19948, London School of Economics and Political Science, LSE Library.
  17. Ebenstein, Avraham & Harrison, Ann & McMillan, Margaret & Phillips, Shannon, 2011. "Estimating the impact of trade and offshoring on American workers using the current population surveys," Policy Research Working Paper Series 5750, The World Bank.
  18. Maarten Goos & Alan Manning, 2007. "Lousy and Lovely Jobs: The Rising Polarization of Work in Britain," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 118-133, February.
  19. Kristin F. Butcher & John Dinardo, 2002. "The Immigrant and Native-Born Wage Distributions: Evidence from United States Censuses," ILR Review, Cornell University, ILR School, vol. 56(1), pages 97-121, October.
  20. William W. Olney, 2012. "Offshoring, immigration, and the native wage distribution," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 830-856, August.
  21. Arnaud Costinot & Jonathan Vogel, 2009. "Matching and Inequality in the World Economy," NBER Working Papers 14672, National Bureau of Economic Research, Inc.
  22. Heather Antecol & Deborah A. Cobb-Clark & Stephen J. Trejo, . "Immigration Policy and the Skills of Immigrants to Australia, Canada, and the United States," Claremont Colleges Working Papers 2001-26, Claremont Colleges.
  23. Emily Blanchard & Gerald Willmann, 2013. "Trade, Education, and the Shrinking Middle Class," CESifo Working Paper Series 4141, CESifo Group Munich.
  24. Ann Harrison & Margaret McMillan, 2011. "Offshoring Jobs? Multinationals and U.S. Manufacturing Employment," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 857-875, August.
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