Offshoring, computerization, labor market polarization and top income inequality

Laurent Cavenaile

Journal of Macroeconomics, 2021, vol. 69, issue C

Abstract: This paper proposes a model of occupational choice with heterogeneous agents in terms of human capital to quantify the role of offshoring and computerization in labor market polarization and increased top income inequality. We find that both offshoring and computerization played a major role regarding labor market polarization in the US over the period 1975–2008. We further show that the last decades can be decomposed into two subperiods. Computerization is the main driver of labor market polarization from 1975 to the mid 1990s, after which globalization (through decreased costs of offshoring) explains more than 70% of job and wage polarization. Our model can also explain around 40% of the observed increase in top income inequality since 1975.

Keywords: Polarization; Inequality; Offshoring; Computerization; Occupational choice (search for similar items in EconPapers)
JEL-codes: F62 J24 J31 O33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:69:y:2021:i:c:s0164070421000252

DOI: 10.1016/j.jmacro.2021.103317

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