Working Paper: CEPR ID: DP16460
Authors: Marius Faber; Andres Sarto; Marco Tabellini
Abstract: Migration has long been considered one of the key mechanisms through which labor markets adjust to economic shocks. In this paper, we analyze the migration response of American workers to two of the most important shocks that hit US manufacturing since the late 1990s - Chinese import competition and the introduction of industrial robots. Exploiting plausibly exogenous variation in exposure across US local labor markets over time, we show that robots caused a sizable reduction in population size, while Chinese imports did not. We rationalize these results in two steps. First, we provide evidence that negative employment spillovers outside manufacturing, caused by robots but not by Chinese imports, are an important mechanism for the different migration responses triggered by the two shocks. Next, we present a model where workers are geographically mobile and compete with either machines or foreign labor in the completion of tasks. The model highlights that two key dimensions along which the shocks differ - the cost savings they provide and the degree of complementarity between directly and indirectly exposed industries - can explain their disparate employment effects outside manufacturing and, in turn, the differential migration response.
Keywords: migration; employment; technology; trade
JEL Codes: J21; J23; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of industrial robots (L63) | reduction in population size (J11) |
| Chinese imports (F14) | reduction in population size (J11) |
| introduction of industrial robots (L63) | reduction in inmigration (F22) |
| Chinese imports (F14) | migration rates (J61) |
| introduction of industrial robots (L63) | negative employment spillovers outside manufacturing (F69) |
| negative employment spillovers outside manufacturing (F69) | reduction in population size (J11) |
| introduction of industrial robots (L63) | stronger migration response for high-skilled individuals (J61) |
| Chinese imports (F14) | increased inmigration in service-oriented CZs (R23) |