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Title: The Contribution of O ffshoring to the Polarization of the U.S. Wage Distribution
Citation Type: Miscellaneous
Publication Year: 2012
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Abstract: Hourly wage data from 1990 to 2011 show a narrowing gap between the median wage and the 10th percentile wage, but an increasing gap between the median and 90th percentile wages. In this paper, I investigate the impact of o shoring on the employment and wage distributions to determine whether it has contributed to this polarization. I develop a task-based framework of the labor market with three inputs and model what happens when the world price for the middle task input declines. The model predicts both a decline in domestic employment and a reduction in the wage paid to workers in this task. However, I demonstrate that observed wages within a task can rise due to selection. I construct a proxy measure of o shoring for both service and material inputs, and use industry level production and trade data from the US Census Bureau's Census of Manufactures, and individual level wage data from the US Census and the American Community Survey to test the implications of the model. O shoring has the anticipated effects on employment and polarization. I find a negative effect of o shoring on employment and a positive effect of o shoring on upper tail wage inequality. Moreover, current levels of industry o shoring are significantly correlated with an industry's lagged occupational composition. In particular, both forms of o shoring decrease with the share of manual occupations and service o shoring increases with the share of routine occupations.
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Authors: Kroeger, Sarah
Publisher: Department of Economics, Boston University
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure
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