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

  • Dauth, Wolfgang

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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File URL: http://econstor.eu/bitstream/10419/79858/1/VfS_2013_pid_160.pdf
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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
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
  2. Jens Suedekum & Sebastian Findeisen & Wolfgang Dauth, 2012. "The Rise of the East and the Far East: German Labor Markets and Trade Integration," ERSA conference papers ersa12p883, European Regional Science Association.
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  9. Autor, David & Dorn, David, 2012. "The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market," IZA Discussion Papers 7068, Institute for the Study of Labor (IZA).
  10. Dauth, Wolfgang & Südekum, Jens, 2014. "Profiles of local growth and industrial change: Facts and an Explanation," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100503, Verein für Socialpolitik / German Economic Association.
  11. 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.
  12. Antonczyk, Dirk & DeLeire, Thomas & Fitzenberger, Bernd, 2010. "Polarization and rising wage inequality: comparing the U.S. and Germany," ZEW Discussion Papers 10-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  14. Maarten Goos & Alan Manning, 2003. "Lousy and lovely jobs: the rising polarization of work in Britain," LSE Research Online Documents on Economics 20002, London School of Economics and Political Science, LSE Library.
  15. 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, vol. 24(2), pages 235-270, April.
  16. Wolfgang Dauth, 2013. "Agglomeration and regional employment dynamics," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 419-435, 06.
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