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The Magnitude and Causes of Job Polarization: A Local Labor Market Approach

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  • Dauth, Wolfgang

Abstract

This paper examines job polarization at the level of local labor markets in Germany over a 30-year period. The major explanation of job polarization is skill biased technological change (SBTC): new technologies are complementary to high paying jobs but substitute workers in routine manual jobs in the middle of the wage distribution, who relocate to low paying service jobs. Several recent papers use regional data to analyze if there is a relation between routine labor and the growth of service jobs, but provide no evidence if the region's labor markets are actually polarized. I close this gap by first introducing an intuitive and simple index to measure the magnitude of job polarization. Then I use comprehensive data on all German employees subject to social security to calculate this index for 204 local labor markets (LLM) in Western Germany between 1980 and 2010. I find that there are substantial disparities if and how strongly LLM are polarized. About one half of all German LLM exhibit significant job polarization, while some others are even inversely polarized. In an econometric analysis, I use this measure to examine the relation between the regional economic structure in the beginning of the period and job polarization. The main finding is that the explanation of SBTC does not apply to all regions to the same extend. Urban regions with many export oriented manufacturing industries in 1980 are most likely to polarize, while SBTC does not seem to have led to polarization in rural regions specialized in traditional manufacturing. --

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79858.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79858

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  1. Dauth, Wolfgang & Findeisen, Sebastian & Suedekum, Jens, 2012. "The rise of the East and the Far East : German labor markets and trade integration," IAB Discussion Paper 201216, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(4), pages 1279-1333, November.
  3. Jens Suedekum & Wolfgang Dauth, 2013. "Profiles of local growth and industrial change: Facts and an explanation," ERSA conference papers ersa13p247, European Regional Science Association.
  4. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
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  6. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising wage inequality, the decline of collective bargaining, and the gender wage gap," Labour Economics, Elsevier, Elsevier, vol. 17(5), pages 835-847, October.
  7. David H. Autor & David Dorn, 2009. "The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market," NBER Working Papers 15150, National Bureau of Economic Research, Inc.
  8. Raven Molloy & Christopher L. Smith & Abigail Wozniak, 2011. "Internal Migration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 173-96, Summer.
  9. repec:fth:stanho:e-95-4 is not listed on IDEAS
  10. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2006. "The Polarization of the U.S. Labor Market," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 189-194, May.
  11. David Card & Francis Kramarz & Thomas Lemieux, 1996. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," NBER Working Papers 5487, National Bureau of Economic Research, Inc.
  12. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 24(2), pages 235-270, April.
  13. Dustmann, Christian & Ludsteck, Johannes & Schönberg, Uta, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA).
  14. Wolfgang Dauth, 2013. "Agglomeration and regional employment dynamics," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 419-435, 06.
  15. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  16. Antonczyk, Dirk & DeLeire, Thomas C. & Fitzenberger, Bernd, 2010. "Polarization and Rising Wage Inequality: Comparing the U.S. and Germany," IZA Discussion Papers 4842, Institute for the Study of Labor (IZA).
  17. Maarten Goos & Alan Manning, 2003. "Lousy and lovely jobs: the rising polarization of work in Britain," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20002, London School of Economics and Political Science, LSE Library.
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