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Title: Outsourcing and Computers: Any Impact on Urban Skill Levels and Land Prices?

Citation Type: Miscellaneous

Publication Year: 2006

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Abstract: Cities in the U.S. with a higher initial share of college graduates have had a greater subsequent increase in the share of skilled workers over the past two decades. Concurrently, land prices have grown faster in these skilled cities. This paper argues that the diffusion of computers and outsourcing may partly explain these two phenomena. In the presented model, skilled workers are more productive in skilled cities and need unskilled support services. The cities unskilled workers can perform support services, but, when it is cheaper, such services can be undertaken by computers or outsourced to less-skilled cities. New technologies facilitating computerization and outsourcing can increase the skill levels and land prices in skilled cities, under fairly general assumptions. The basic economics of the analysis is that the new technologies diminish the need for unskilled workers in skilled cities and permit skilled workers to earn higher wages. The technological gains increase the demand for skilled workers to live in skilled cities and drive up land prices. Empirically, this paper documents seven trends that the theory rationalizes. Particularly important is the rising wage inequality in skilled cities relative to less-skilled cities, which supports a production theory.

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Authors: Liao, Wen-Chi

Publisher: University of Minnesota

Data Collections: IPUMS USA

Topics: Education, Housing and Segregation, Labor Force and Occupational Structure

Countries: United States