Working Paper: CEPR ID: DP16641
Authors: Richard Baldwin; Jonathan Dingel
Abstract: The Covid-19 pandemic has introduced huge numbers of employers and employees to remote work. How many of these newly remote jobs will go overseas? We offer a rough quantification based on two observations: 1) offshore work is trade in services, and 2) the number of telemigrants is the volume of this trade divided by the average wage. Combining these with gravity-model estimates, we can roughly predict the number of new telemigrants that would arise from lower barriers to trade in services. Telemigration seems unlikely to be transformative when it comes to the development paths of most emerging economies. The baseline service trade flows are modest, and the standard gravity model restricts modest changes to have modest impacts. There are no tipping points in structural gravity models. Finally, we propose a simple model of telemigration in which small changes can have large consequences. The key is to assume that latent comparative advantage takes a different shape than typically assumed in quantitative trade models. Given this, small changes in trade costs can generate large and asymmetric increases in the exports of service tasks from low-wage nations.
Keywords: telemigration; service-led development; offshoring; service trade
JEL Codes: J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| offshorability of jobs (F66) | economic impacts of trade cost reductions on service exports (F69) |
| telemigration (J61) | number of jobs offshored from high-wage to low-wage nations (F66) |
| trade costs (F19) | offshorability of jobs (F66) |
| trade costs (F19) | service exports from low-wage countries (F66) |
| telemigration (J61) | transformative effect on development trajectories of emerging economies (O11) |