Telemigration and Development: On the Offshorability of Teleworkable Jobs
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.
We thank Linghui Wu and Ka Lok (Steve) Wong for excellent research assistance, Kari Greenswag for helpful editorial assistance, and Gene Grossman and Thomas Sampson for valuable feedback. This paper was prepared for the book project, AI/Robots: Labour, Trade, Growth and Welfare, edited by Lili Yan Ing and Gene Grossman for the Economic Research Institute for ASEAN and East Asia (ERIA) in Jakarta. Dingel thanks the Cohen and Keenoy Faculty Research Fund at the University of Chicago Booth School of Business. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.