Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/114486
Authors: 
Mandelman, Federico S.
Zlate, Andrei
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2014-28
Abstract: 
During the last three decades, jobs in the middle of the skill distribution disappeared, and employment expanded for high- and low-skill occupations. Real wages did not follow the same pattern. Although earnings for the high-skill occupations increased robustly, wages for both low- and middleskill workers remained subdued. We attribute this outcome to the rise in offshoring and low-skilled immigration, and we develop a three-country stochastic growth model to rationalize this outcome. In the model, the increase in offshoring negatively affects the middle-skill occupations but benefits the high-skill ones, which in turn boosts aggregate productivity. As the income of high-skill occupations rises, so does the demand for services provided by low-skill workers. However, low-skill wages remain depressed as a result of the surge in unskilled immigration. Native workers react to immigration by upgrading the skill content of their labor tasks as they invest in training.
Subjects: 
labor market polarization
task upgrading
offshoring
labor migration
heterogeneous agents
international business cycles
JEL: 
F16
F41
Document Type: 
Working Paper

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