Growing Apart: Tradable Services and the Fragmentation of the U.S. Economy

No 307, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Between 1980 and 2010, the college wage premium in U.S. labor markets with larger initial shares of high-skill service employment grew substantially faster than the nationwide average. I show that this trend can be explained within the context of a model of interregional trade, where a reduction in communication costs magnifies regional specialization in high-skill services, raising the skill premium in service-exporting regions and reducing it in service-importing regions. Quantitatively, I show that the decline in communication costs I infer from sectoral trade imbalances can explain a substantial part of the differential skill premium growth across U.S. labor markets in the data. These regional changes aggregate to account for 30 percent of the rise in the overall U.S. college wage premium between 1980 and 2010.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:307

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More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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