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Title: Where Have the Middle-Wage Workers Gone? A Study of Polarization Using Panel Data

Citation Type: Working Paper

Publication Year: 2011

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Abstract: Using a general equilibrium model with endogenous sorting of workers into occupationsbased on comparative advantage, this paper derives the e ects of routine-biased technicalchange on occupational transition patterns and wage changes of individual workers. Thesepredictions are then tested using data from the Panel Study of Income Dynamics (PSID)from 1976 to 2007. Consistent with the predictions of the model, occupational mobilitypatterns of routine workers show strong evidence of selection on ability. Workers of relativelyhigh (low) ability are more likely to switch to non-routine cognitive (non-routinemanual) occupations. Also consistent with the predictions of the model, there has beena signi cant increase in the relative wage premium in non-routine occupations. Workersstaying in routine jobs therefore perform signi cantly worse in terms of wage growth thanworkers staying in any other type of occupation. Switchers from routine to non-routinemanual jobs have signi cantly lower wage growth than stayers over horizons of up to twoyears, while those who switch to non-routine cognitive jobs have signi cantly higher wagegrowth than stayers over a variety of time horizons.

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Authors: Matias Cortes, Guido

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Data Collections: IPUMS USA, IPUMS CPS

Topics: Labor Force and Occupational Structure

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