Spillovers from High-Skill Consumption to Low-Skill Labor Markets

47 Pages Posted: 23 Oct 2007

See all articles by Francesca Mazzolari

Francesca Mazzolari

University of California, Irvine; IZA Institute of Labor Economics

Giuseppe Ragusa

University of California, Irvine - Department of Economics

Date Written: September 2007

Abstract

Census data show that since 1980 low-skill workers in the United States have been increasingly employed in the provision of non-tradeable time-intensive services - such as food preparation and cleaning - that can be broadly thought as substitutes of home production activities. Meanwhile the wage gap between this sector and the rest of the economy has shrunk. If skilled workers, with their high opportunity cost of time, demand more of these time-intensive services, then wage gains at the top of the wage distribution (such as those observed in the last three decades) are expected to raise the consumption of these services, consistent with these stylized facts. Using both consumption expenditure data and city-level data on employment and wages of workers of different skills, we provide several pieces of evidence in favor of these demand shifts, and we argue that they provide a viable explanation for the growth in wages at the bottom quantiles observed in the last fifteen years.

Keywords: service jobs, market substitutes for home production, low-skill employment and wages, wage growth polarization

JEL Classification: J21, J22, J23, J31

Suggested Citation

Mazzolari, Francesca and Ragusa, Giuseppe, Spillovers from High-Skill Consumption to Low-Skill Labor Markets (September 2007). Available at SSRN: https://ssrn.com/abstract=1022931 or http://dx.doi.org/10.2139/ssrn.1022931

Francesca Mazzolari (Contact Author)

University of California, Irvine ( email )

Campus Drive
Irvine, CA 62697-3125
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Giuseppe Ragusa

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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