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The Wage Response to Shocks: The Role of Inter-Occupational Labor Adjustment

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  • Tschopp, Jeanne

Abstract

How does a region's average wage adjust to a shock, say trade-induced or technology-induced,on labor demand? Beaudry, Green and Sand (2010) recently demonstrated the inaccuracy of thetraditionally-used shift-share analysis - a partial equilibrium exercise - in addressing this question.While they focus on shifts in the industrial composition of employment, I argue that the interplaybetween inter-sectoral and inter-occupational labor adjustments is fundamental in assessing thespillover effects they emphasize. I extend their search-and-bargaining model to incorporateoccupations and illustrate why omitting inter-occupational labor adjustments could lead tounderestimation. Using German individual-level data for 1977-2001, I estimate that omitting thisdimension creates a substantial and statistically significant negative bias representing two-thirds ofthe total effect. 

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  • Tschopp, Jeanne, 2011. "The Wage Response to Shocks: The Role of Inter-Occupational Labor Adjustment," Papers 235, World Trade Institute.
  • Handle: RePEc:wti:papers:235
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    Cited by:

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    2. Joao Galindo da Fonseca & Charles Berubé, 2020. "Spouses, Children and Entrepreneurship," Cahiers de recherche 05-2020, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Germàn Pupato & Ben Sand & Jeanne Tschopp, 2019. "Estimating the Gains from Trade in Frictional Local Labor Markets," Diskussionsschriften dp1909, Universitaet Bern, Departement Volkswirtschaft.

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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