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Labor Market Adjustment In The Us


  • SAAD-LESSLER, Joelle



This paper analyzes how changes in the local skill distribution of the labor force affect the local wage distribution. I measure the elasticity of wages to changes in the supply of the various skill groups, using time series and cross sectional data on Metropolitan Statistical Areas in the US in 1980 and 1990. Unlike previous studies, I estimate own and cross-wage elasticity for each skill group and I allow for the existence of human capital spillovers in the labor market. Moreover, I introduce a new instrument to control for the bias that occurs when local labor supplies are simultaneously determined with local wages. I find that cross-wage elasticities are significantly different from zero and therefore should not be ignored. I also find that the estimated cross-wage elasticities are not symmetrical across skill groups, and therefore should not be constrained to be symmetrical.

Suggested Citation

  • SAAD-LESSLER, Joelle, 2008. "Labor Market Adjustment In The Us," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 8(2), pages 29-50.
  • Handle: RePEc:eaa:eerese:v:8:y2008:i:8_10

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    References listed on IDEAS

    1. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
    2. Juhn, Chinhui & Kim, Dae Il, 1999. "The Effects of Rising Female Labor Supply on Male Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 23-48, January.
    3. Joseph G. Altonji & David Card, 1991. "The Effects of Immigration on the Labor Market Outcomes of Less-skilled Natives," NBER Chapters,in: Immigration, Trade, and the Labor Market, pages 201-234 National Bureau of Economic Research, Inc.
    4. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    5. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    6. Bound, John & Holzer, Harry J, 1993. "Industrial Shifts, Skills Levels, and the Labor Market for White and Black Males," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 387-396, August.
    7. Gianmarco I. P. Ottaviano & Giovanni Peri, 2016. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 2, pages 35-80 World Scientific Publishing Co. Pte. Ltd..
    8. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-391, October.
    9. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, January.
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    More about this item


    Labor skill; Statistical areas; US; Wage elasticity;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs


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