A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring
65 Pages Posted: 4 Nov 2011 Last revised: 25 Jun 2023
Date Written: November 2011
Abstract
We study how the rise of trade in services with China and India has impacted U.S. labour markets. The topic has two understudied aspects: it deals with service trade (most studies deal with manufacturing trade) and it examines the historical first of U.S. workers competing with educated but low-wage foreign workers. Our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations. To develop an estimation framework that deals with these, we imbed a partial equilibrium model of 'trade in tasks' within a general equilibrium model of occupational choice. The model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and, in particular, to distinguish workers who switch 'up' from those who switch 'down'. (Switching 'down' means switching to an occupation that pays less on average than the current occupation). We apply these insights to matched CPS data for 1996-2007. The cumulative 10-year impact of rising service imports from China and India has been as follows. (1) Downward and upward occupational switching increased by 17% and 4%, respectively. (2) Transitions to unemployment increased by a large 0.9 percentage points. (3) The earnings of occupational 'stayers' fell by a tiny 2.3%. (4) The earnings impact for occupational switchers is not identified without an assumption about worker sorting. Under the assumption of no worker sorting, downward (upward) switching was associated with an earning change of -13.9% (+12.1%). Under the assumption of worker sorting, there is no statistically significant impact on earnings.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Labor Market Rigidities, Trade and Unemployment
By Elhanan Helpman and Oleg Itskhoki
-
Labor Market Rigidities, Trade, and Unemployment
By Elhanan Helpman and Oleg Itskhoki
-
Inequality and Unemployment in a Global Economy
By Elhanan Helpman, Oleg Itskhoki, ...
-
Inequality and Unemployment in a Global Economy
By Elhanan Helpman, Oleg Itskhoki, ...
-
Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity
By Gabriel J. Felbermayr, Julien Prat, ...
-
Good Jobs, Bad Jobs, and Trade Liberalization
By Donald R. Davis and James Harrigan
-
Trade and Labor Market Outcomes
By Elhanan Helpman, Oleg Itskhoki, ...
-
Trade and Labor Market Outcomes
By Elhanan Helpman, Oleg Itskhoki, ...
-
Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation
By Hartmut Egger and Udo Kreickemeier