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Horizontal and Vertical Polarization: Task-Specific Technological Change in a Multi-Sector Economy

Author

Listed:
  • Sang Yoon (Tim) Lee

    (Queen Mary University of London and CEPR)

  • Yongseok Shin

    (Washington University in St. Louis, Federal Reserve Bank of St. Louis and NBER)

Abstract

We construct a multi-layer model of skills, occupations, and sectors. Technological progress among middle-skill occupations raises the employment shares and relative wages of lower- and higher-skill occupations (horizontal polarization), and those of managers over workers (vertical polarization). Polarization is faster within sectors that rely more on middle-skill workers, endogenously boosting their TFP. This shrinks their employment and output shares (structural change) if sector outputs are complementary. We empirically validate our theoretical predictions, and show that task-specific technological progress, which was faster for routine-manual tasks and slower for interpersonal tasks, played a major role in transforming the U.S. economy since 1980.

Suggested Citation

  • Sang Yoon (Tim) Lee & Yongseok Shin, 2019. "Horizontal and Vertical Polarization: Task-Specific Technological Change in a Multi-Sector Economy," Working Papers 888, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:888
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    More about this item

    Keywords

    job polarization; structural change; wage inequality;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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