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Title: From Job Polarization to Wealth Inequality: A Quantitative Test of Routinization Hypothesis
Citation Type: Miscellaneous
Publication Year: 2013
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Abstract: A recently growing body of literature has linked the ongoing increase in U.S. wage inequality in last three decades to the job and wage polarization processes. In this paper, we test how much of these employment and wage structure shifts can be ex- plained by the routinization hypothesis alone over the period 1981-2011. We do this in an incomplete markets environment with heterogeneous agents. Incomplete markets and the resulting saving behavior enable us to establish the missing link between job polarization literature and wealth inequality and also to introduce a simple mechanism of educational choice. Our model economy shows that routinization hypothesis alone accounts for a signiÖcant portion of the increase in employment share of high skill occupations and their relative wages, as well as the increase in the supply of labor with a college equivalent degree. The model has also been successful in explaining the erosion of wealth in the middle of wealth distribution, thereby indicating the role that might have been played by job and wage polarization on the recently discussed phenomenon of middle class squeeze. On the other hand, the model fails to generate the growth in the share of low skill occupations. Preliminary results show that a two- sector version of the model is remarkably more promising in generating the shifts in both employment and wage structures over the past three decades.
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Authors: ORAK, MUSA
Publisher: Department of Economics, UCLA
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
Countries: United States