IDEAS home Printed from https://ideas.repec.org/p/fip/fedmoi/0025.html
   My bibliography  Save this paper

Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets

Author

Listed:
  • Fabian Eckert
  • Sharat Ganapati
  • Conor Walsh

Abstract

We study a group of service industries that are skill-intensive, widely traded, and have recently seen explosive wage growth. Between 1980 and 2015, these ?Skilled Tradable Services? accounted for a sharply increasing share of employment among the highest earning Americans. Unlike any other sector, their wage growth was strongly biased toward the densest local labor markets and the highest paying firms. These services alone explain 30% of the increase in inequality between the 50th and 90th percentiles of the wage distribution. We offer an explanation for these patterns that highlights the complementarity between the non-rivalry of knowledge and changes in communication costs.

Suggested Citation

  • Fabian Eckert & Sharat Ganapati & Conor Walsh, 2019. "Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets," Opportunity and Inclusive Growth Institute Working Papers 25, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:0025
    DOI: 10.21034/iwp.25
    as

    Download full text from publisher

    File URL: https://www.minneapolisfed.org/institute/working-papers-institute/iwp25.pdf
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.21034/iwp.25?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," Working Papers 09-26, Center for Economic Studies, U.S. Census Bureau.
    2. Teresa C. Fort & Justin R. Pierce & Peter K. Schott, 2018. "New Perspectives on the Decline of US Manufacturing Employment," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 47-72, Spring.
    3. Thomas Piketty & Gabriel Zucman, 2014. "Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1255-1310.
    4. Fabian Eckert, 2019. "Growing Apart: Tradable Services and the Fragmentation of the U.S. Economy," 2019 Meeting Papers 307, Society for Economic Dynamics.
    5. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    6. Tolbert, Charles M. & Sizer, Molly, 1996. "U.S. Commuting Zones and Labor Market Areas: A 1990 Update," Staff Reports 278812, United States Department of Agriculture, Economic Research Service.
    7. J. Bradford Jensen & Lori G. Kletzer, 2005. "Tradable Services: Understanding the Scope and Impact of Services Outsourcing," Working Paper Series WP05-9, Peterson Institute for International Economics.
    8. Teresa C. Fort, 2017. "Technology and Production Fragmentation: Domestic versus Foreign Sourcing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 650-687.
    9. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 9(1), pages 58-73.
    10. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins & Jeff Larrimore, 2012. "Recent Trends in Top Income Shares in the United States: Reconciling Estimates from March CPS and IRS Tax Return Data," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 371-388, May.
    11. Carol A. Corrado & Charles R. Hulten, 2010. "How Do You Measure a "Technological Revolution"?," American Economic Review, American Economic Association, vol. 100(2), pages 99-104, May.
    12. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    13. Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 149-195.
    14. Steven N. Kaplan & Joshua Rauh, 2013. "It's the Market: The Broad-Based Rise in the Return to Top Talent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 35-56, Summer.
    15. Matthew Smith & Danny Yagan & Owen Zidar & Eric Zwick, 2019. "Capitalists in the Twenty-First Century," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 1675-1745.
    16. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jean Imbs & Laurent L. Pauwels, 2020. "High Order Openness," Working Papers 20200047, New York University Abu Dhabi, Department of Social Science, revised Jun 2020.
    2. Xiang Ding & Teresa C. Fort & Stephen J. Redding & Peter K. Schott, 2019. "Structural Change Within Versus Across Firms: Evidence from the United States," Working Papers 2019-9, Princeton University. Economics Department..
    3. Georgeta Ilie, 2023. "Trade In Skill-Intensive Services - Through the Pandemic and Accelerating Digitalization," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 11(1), pages 73-83, May.
    4. Fabian Eckert & Teresa C. Fort & Peter K. Schott & Natalie J. Yang, 2020. "Imputing Missing Values in the US Census Bureau's County Business Patterns," NBER Working Papers 26632, National Bureau of Economic Research, Inc.
    5. Sharat Ganapati, 2020. "Comment on The Servicification of the US Economy: The Role of Startups versus Incumbent Firms," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 390-396, National Bureau of Economic Research, Inc.
    6. Michael J. Andrews & Aaron K. Chatterji & Scott Stern, 2021. "Introduction: Beyond 140 Characters," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 1-28, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blundell, Richard & Joyce, Robert & Norris Keiller, Agnes & Ziliak, James P., 2018. "Income inequality and the labour market in Britain and the US," Journal of Public Economics, Elsevier, vol. 162(C), pages 48-62.
    2. repec:spo:wpmain:info:hdl:2441/vbu6kd1s68o6r34k5bcm3iopv is not listed on IDEAS
    3. Xiang Ding & Teresa C. Fort & Stephen J. Redding & Peter K. Schott, 2019. "Structural Change Within Versus Across Firms: Evidence from the United States," Working Papers 2019-9, Princeton University. Economics Department..
    4. Cabral, René & García-Díaz, Rocío & Mollick, André Varella, 2016. "Does globalization affect top income inequality?," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 916-940.
    5. Markus Poschke, 2018. "The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 1-41, July.
    6. ADACHI Daisuke & SAITO Yukiko, 2020. "Multinational Production and Labor Share," Discussion papers 20012, Research Institute of Economy, Trade and Industry (RIETI).
    7. Denis Chetverikov & Bradley Larsen & Christopher Palmer, 2016. "IV Quantile Regression for Group‐Level Treatments, With an Application to the Distributional Effects of Trade," Econometrica, Econometric Society, vol. 84, pages 809-833, March.
    8. Diego Winkelried & Bruno Escobar, 2022. "Declining inequality in Latin America? Robustness checks for Peru," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 223-243, March.
    9. Hager, Sandy Brian, 2020. "Varieties of Top Incomes," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(4), pages 1175-1198.
    10. Nora Lustig, 2020. "The ``missing rich'' in household surveys: causes and correction approaches," Working Papers 520, ECINEQ, Society for the Study of Economic Inequality.
    11. Luis Garicano & Esteban Rossi-Hansberg, 2015. "Knowledge-Based Hierarchies: Using Organizations to Understand the Economy," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 1-30, August.
    12. Pisch, Frank & Berlingieri, Giuseppe, 2022. "Managing Export Complexity: The Role of Service Outsourcing," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 135680, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    13. Choi, Jaerim, 2023. "Offshoring, matching, and income inequality," Journal of Mathematical Economics, Elsevier, vol. 106(C).
    14. Bradley Hardy & James P. Ziliak, 2014. "Decomposing Trends In Income Volatility: The “Wild Ride” At The Top And Bottom," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 459-476, January.
    15. Atif R. Mian & Ludwig Straub & Amir Sufi, 2020. "The Saving Glut of the Rich," NBER Working Papers 26941, National Bureau of Economic Research, Inc.
    16. Bond, Timothy N. & Giuntella, Osea & Lonsky, Jakub, 2023. "Immigration and work schedules: Theory and evidence," European Economic Review, Elsevier, vol. 152(C).
    17. Ge, Suqin & Zhou, Yu, 2020. "Robots, computers, and the gender wage gap," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 194-222.
    18. Nora Lustig, 2019. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," Commitment to Equity (CEQ) Working Paper Series 75, Tulane University, Department of Economics.
    19. Giraldo Paez, Daniel & Liscow, Zachary, 2024. "Inequality snowballing," International Review of Law and Economics, Elsevier, vol. 77(C).
    20. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.
    21. Adam Looney & Kevin B. Moore, 2015. "Changes in the Distribution of After-Tax Wealth: Has Income Tax Policy Increased Wealth Inequality?," Finance and Economics Discussion Series 2015-58, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Wage inequality; Skill biased; Technological change; Urban growth; Trade and geography;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmoi:0025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.