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?:abstract
  • We propose a mechanism for labor-market polarization based on the nonhomotheticity of demand that we call the income-driven channel. Our mechanism builds on a novel empirical fact: expenditure elasticities and production intensities in low- and high-skill occupations are positively correlated across sectors. Thus, as income grows, demand shifts towards expenditure-elastic sectors, and the relative demand for low- and high-skill occupations increases, causing labor-market polarization. A calibrated general-equilibrium model suggests this mechanism accounts for 90\% and 35\% of the increase in the wage-bill share of low- and high-skill occupations observed in the US during 1980-2016, and for 64\% and 28\% of the rise in the employment shares of low- and high-skill occupations. This mechanism is similarly important for the polarization of labor markets in Western Europe during 1980-2016, as well as in the US during earlier decades and, possibly, the near future. (xsd:string)
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  • 2020 (xsd:gyear)
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  • 2020 (xsd:gyear)
?:doi
  • 10.3386/w27455 ()
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  • 27455 (xsd:string)
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  • Income-driven Labor Market Polarization (xsd:string)
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  • (27455), 2020 (xsd:string)
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  • European Union Labour Force Survey (EU-LFS) (xsd:string)
  • European Union Statistics on Income and Living Conditions (EU-SILC) (xsd:string)
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