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International Trade and Job Polarization: Evidence at the Worker-Level

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  • Wolfgang Keller
  • Hâle Utar
Abstract
This paper examines the role of international trade for job polarization– the decline in opportunities for mid-wage workers while those for high- and low-wage workers increase. With employer-employee matched data on virtually all workers and firms in Denmark between 1999 and 2009, we show that import competition has caused worker-level adjustments that lead to job polarization. When mid-wage workers adjust to the shock, highly educated and skilled workers end up in high-wage jobs whereas less educated workers end up in low-wage positions. We show that the specific tasks performed by a worker are central in determining trade’s impact, and workers performing manual tasks are the ones most affected regardless of how routine or non-routine these tasks are. Trade lets foreign workers compete against domestic workers, in contrast to technical progress which pits man versus machine country by country. Quantitatively, we find that job polarization through trade-induced worker adjustments is at least as strong as through technical change and offshoring.

Suggested Citation

  • Wolfgang Keller & Hâle Utar, 2016. "International Trade and Job Polarization: Evidence at the Worker-Level," NBER Working Papers 22315, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22315
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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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