 Labor Market Polarization and The Great Divergence: Theory and EvidenceEric Mengus, Donald R. Davis and Tomasz Michalski No 14623, CEPR Discussion Papers from C.E.P.R. Discussion Papers Abstract: In recent decades, middle-paid jobs have declined, replaced by a mix of high and low-paid jobs. This is labor market polarization. At the same time, initially skilled and typically larger cities have become even more skilled relative to initially less skilled and typically smaller cities. This is the great divergence. We develop a theory that links these two phenomena. We draw on existing models of polarization and heterogeneous labor in spatial equilibrium, adding to these a sharper interaction of individual- and city-level comparative advantage. We then confront the predictions of the theory with detailed data on occupational growth for a sample of 117 French cities. We find, consistent with our theory, that middle-paid jobs decline most sharply in larger cities; that these lost jobs are replaced two-to-one by high-paid jobs in the largest cities and two-to-one by low-paid jobs in the smallest cities; and that the lost middle-paid jobs are concentrated in an upper tier in the large cities and a lower tier in the smaller cities. Keywords: Labor market polarization; Great divergence; System of cities; Inequality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14623 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX. |
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