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Growing Apart: Tradable Services and the Fragmentation of the U.S. Economy

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  • Fabian Eckert

    (Yale University)

Abstract

Between 1980 and 2010, the college wage premium in U.S. labor markets with larger initial shares of high-skill service employment grew substantially faster than the nationwide average. I show that this trend can be explained within the context of a model of interregional trade, where a reduction in communication costs magnifies regional specialization in high-skill services, raising the skill premium in service-exporting regions and reducing it in service-importing regions. Quantitatively, I show that the decline in communication costs I infer from sectoral trade imbalances can explain a substantial part of the differential skill premium growth across U.S. labor markets in the data. These regional changes aggregate to account for 30 percent of the rise in the overall U.S. college wage premium between 1980 and 2010.

Suggested Citation

  • Fabian Eckert, 2019. "Growing Apart: Tradable Services and the Fragmentation of the U.S. Economy," 2019 Meeting Papers 307, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:307
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    Citations

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    Cited by:

    1. Ana Maria Santacreu & Jing Zhang & Michael Sposi, 2019. "A Quantitative Analysis of Tariffs across U.S. States," 2019 Meeting Papers 259, Society for Economic Dynamics.
    2. Blank, Sven & Egger, Peter H. & Merlo, Valeria & Wamser, Georg, 2022. "A structural quantitative analysis of services trade de-liberalization," Journal of International Economics, Elsevier, vol. 137(C).
    3. Fabian Eckert & Sharat Ganapati & Conor Walsh, 2020. "Urban-Biased Growth: A Macroeconomic Analysis," CESifo Working Paper Series 8705, CESifo.
    4. Paul Gaggl & Aspen Gorry & Christian vom Lehn, 2023. "Structural Change in Production Networks and Economic Growth," CESifo Working Paper Series 10460, CESifo.
    5. Ana Maria Santacreu & Michael Sposi & Jing Zhang, 2021. "What Determines State Heterogeneity in Response to US Tariff Changes?," Working Papers 2021-007, Federal Reserve Bank of St. Louis, revised 08 Mar 2023.
    6. Magli, Martina, 2022. "The Spillover Effect of Services Offshoring on Local Labour Markets," Rationality and Competition Discussion Paper Series 351, CRC TRR 190 Rationality and Competition.
    7. Donald R. Davis & Eric Mengus & Tomasz K. Michalski, 2020. "Labor Market Polarization and The Great Urban Divergence," NBER Working Papers 26955, National Bureau of Economic Research, Inc.
    8. Li, Xiaolu & Tang, Yang, 2024. "The distributional impacts of high speed rail: Evidence from China," Economic Modelling, Elsevier, vol. 132(C).
    9. Zhang, Xiaobei & Wang, Xiaojun, 2021. "Measures of human capital and the mechanics of economic growth," China Economic Review, Elsevier, vol. 68(C).
    10. 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..
    11. Yuancheng Han & Jorge Miranda-Pinto & Satoshi Tanaka, 2023. "Service Trade, Regional Specialization, and Welfare," CAMA Working Papers 2023-41, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. 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.
    13. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2021. "The internal spatial organization of firms: Evidence from Denmark," Journal of Urban Economics, Elsevier, vol. 124(C).
    14. 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.
    15. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    16. Rodrigo Ad'o & Costas Arkolakis & Federico Esp'sito, 2019. "Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence," Cowles Foundation Discussion Papers 2163, Cowles Foundation for Research in Economics, Yale University.
    17. James Lennox, 2020. "More working from home will change the shape and size of cities," Centre of Policy Studies/IMPACT Centre Working Papers g-306, Victoria University, Centre of Policy Studies/IMPACT Centre.
    18. 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.
    19. Gustavo de Souza, 2020. "Employment and Welfare Effects of the Quota for Disabled Workers in Brazil," Working Paper Series WP 2023-11, Federal Reserve Bank of Chicago.

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