The Effects of Globalisation on the US Labour Mark'et: Service Sectors Considered

24 Pages Posted: 19 Dec 2013

See all articles by Ling Feng

Ling Feng

Shanghai University of Finance and Economics - School of Finance

Weijun Hu

affiliation not provided to SSRN

Zhiyuan Li

Shanghai University of Finance and Economics; University of California, Davis

Date Written: December 2013

Abstract

How has globalisation affected employment and wages in the United States? Existing studies largely ignore the intersector labour movement between the manufacturing and service sectors by focusing only on the intrasector movement within the manufacturing sector. However, by decomposing the aggregate labour demand in the United States, we find that the intersector movement is more substantial than intrasector movement. Motivated by the decomposition results, this study presents a three‐sector model that includes a manufacturing sector and two service sectors at varying skill intensities. The model shows that offshoring might translate into smaller‐than‐expected wage changes because of the intersector labour movement. In line with the theoretical predictions, two notable empirical results are presented. First, an occupation's exposure to offshoring has non‐significant, albeit negative, effects on wages. Second, the more an occupation is exposed to offshoring, the lower its employment in the manufacturing sector as a share of its total employment. Furthermore, these effects are larger for more routine occupations or those requiring less education.

Suggested Citation

Feng, Ling and Hu, Weijun and Li, Zhiyuan, The Effects of Globalisation on the US Labour Mark'et: Service Sectors Considered (December 2013). The World Economy, Vol. 36, Issue 12, pp. 1542-1565, 2013. Available at SSRN: https://ssrn.com/abstract=2369608 or http://dx.doi.org/10.1111/twec.12088

Ling Feng (Contact Author)

Shanghai University of Finance and Economics - School of Finance ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Weijun Hu

affiliation not provided to SSRN

Zhiyuan Li

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States

HOME PAGE: http://www.econ.ucdavis.edu/graduate/zhyli/

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