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Labor Market Polarization and International Macroeconomic Dynamics

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  • Federico Mandelman

    (Federal Reserve Bank of Atlanta)

Abstract

During the last thirty years, labor markets in advanced economies where characterized by their remarkable polarization. As job opportunities in middle-skill occupations disappeared, employment opportunities concentrated in the highest- and lowest wage occupations. I develop a two-country stochastic growth model that incorporates trade in tasks, rather than in goods, and reveal that this setup can replicate the observed polarization in the U.S. This polarization was not an steady process: the relative employment share of each skill group significantly fluctuated over short-to medium horizons. I show that the domestic and international aggregate shocks estimated within this framework can rationalize such employment dynamics, while providing a good fit to the macroeconomic data. The model is estimated with employment data for different skills groups, and trade-weighted macroeconomic indicators.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 291.

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Date of creation: 2013
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Handle: RePEc:red:sed013:291

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  1. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc.
  2. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  3. Fabio Ghironi & Marc J. Melitz, 2004. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," Boston College Working Papers in Economics 599, Boston College Department of Economics.
  4. International Monetary Fund, 2010. "Investment," IMF Working Papers 10/207, International Monetary Fund.
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  6. Andrei Zlate, 2010. "Offshore production and business cycle dynamics with heterogeneous firms," International Finance Discussion Papers 995, Board of Governors of the Federal Reserve System (U.S.).
  7. Alejandro Justiniano & Bruce Preston, 2010. "Monetary policy and uncertainty in an empirical small open-economy model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(1), pages 93-128.
  8. Firpo, Sergio & Fortin, Nicole M & Lemieux, Thomas, 2012. "Occupational tasks and changes in the wage structure," Textos para discussão 284, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  9. Federico Mandelman & Pau Rabanal & Juan Francisco Rubio-Ramirez & Diego Vilan, 2011. "Investment Specific Technology Shocks and International Business Cycles: An Empirical Assessment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 136-155, January.
  10. Nir Jaimovich & Henry E. Siu, 2012. "The Trend is the Cycle: Job Polarization and Jobless Recoveries," NBER Working Papers 18334, National Bureau of Economic Research, Inc.
  11. Wright, Greg C., 2014. "Revisiting the employment impact of offshoring," European Economic Review, Elsevier, vol. 66(C), pages 63-83.
  12. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2008. "The labor market experience and impact of undocumented workers," Working Paper 2008-07, Federal Reserve Bank of Atlanta.
  13. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
  14. Feige, Edgar L. & Cebula, Richard, 2011. "America’s Underground Economy: Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S," MPRA Paper 29672, University Library of Munich, Germany.
  15. Federico Mandelman & Andrei Zlate, 2010. "Immigration, remittances and business cycles," International Finance Discussion Papers 998, Board of Governors of the Federal Reserve System (U.S.).
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