Revisiting the Role of Trade and Automation in US Labor Market Polarization

46 Pages Posted: 26 Jul 2019

See all articles by Cosimo Beverelli

Cosimo Beverelli

World Trade Organization (WTO); European University Institute

Stela Rubínová

World Trade Organization (WTO) - Economic Research and Statistics Division

Victor Stolzenburg

World Trade Organization (WTO) - Economic Research and Analysis Division

Nicole Woessner

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Date Written: July 2019

Abstract

The increase in the share of high- and low-wage employment at the expense of middle-wage employment has been a striking feature of the US economy. We exploit differences across local labor markets in the exposure to Global Value Chains (GVCs), Chinese import competition and automation to study the drivers of this labor market polarization. Using value added trade data, we are able to correctly assign trade-related shocks to local labor markets, based on the source of value added. Across the 722 commuting zones that approximate US local labor markets, we find that employment polarization is mainly driven by their exposure to automation. GVCs lead to an increase in the employment share of relatively high-wage occupations (which we call ‘skill upgrading’), while import competition from China leads to an increase in the employment share of relatively low-wage occupations (which we call ‘skill downgrading’). Trade as a combination of the two thus may contribute to employment polarization but to a lesser extent than automation.

Keywords: global value chains; employment polarization; automation; import competition

JEL Classification: F14; F16; E24; J31; O33

Suggested Citation

Beverelli, Cosimo and Rubínová, Stela and Stolzenburg, Victor and Woessner, Nicole, Revisiting the Role of Trade and Automation in US Labor Market Polarization (July 2019). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2019/60. Available at SSRN: https://ssrn.com/abstract=3426492 or http://dx.doi.org/10.2139/ssrn.3426492

Cosimo Beverelli (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva, 1202
Switzerland

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Stela Rubínová

World Trade Organization (WTO) - Economic Research and Statistics Division ( email )

Switzerland

Victor Stolzenburg

World Trade Organization (WTO) - Economic Research and Analysis Division ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

Nicole Woessner

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

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