A Multisector Perspective on Wage Stagnation

L. Rachel Ngai and Orhun Sevinc

No 14855, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Low-skill workers are concentrated in sectors that experience fast productivity growth and yet their wages have been stagnating. A multisector perspective is crucial to understand this stagnation as it is not due to an overall stagnation in the marginal product of low-skill workers but a labour reallocation into sectors with slower growth. We show this in a two-sector model where the faster productivity growth causes a fall in the relative price of the low-skill intensive output, which consists of capital and a consumption good that is a complement to the high-skill intensive output. When calibrated to the U.S., the model accounts for a substantial part of the low-skill wage stagnation and its divergence from aggregate productivity during 1980-2010.

Keywords: Wage stagnation; Wage-productivity divergence; Multisector model (search for similar items in EconPapers)
JEL-codes: E24 J23 J31 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: A Multisector Perspective on Wage Stagnation (2025)
Working Paper: A multisector perspective on wage stagnation (2025)
Working Paper: A Multisector Perspective on Wage Stagnation (2023)
Working Paper: A Multisector Perspective on Wage Stagnation (2020)
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