Demand-Driven Labor-Market Polarization

Marti Mestieri (University of Northwestern)

December 3, 2018, 17:00–18:30

Room MF 323

Macroeconomics Seminar


We document that income elastic sectors are more intensive in high- and low-skill occupations than income inelastic sectors, which are relatively more middle-skill intensive. We show that this implies that technological progress (neutral or skill-biased) increases inequality through feedback from demand and generates wage and job polarization. We calibrate the model to 68 U.S. sectors for the 1980-2016 period and find that more than a third of the overall increase in inequality at the bottom and the top of the earnings distribution are accounted for by our mechanism. (joint work with Diego Comin and Ana Danieli)