INTERNATIONAL TRADE AND JOB POLARIZATION: EVIDENCE AT THE WORKER-LEVEL
Wolfgang Keller, Hale Utar
Abstract
This paper examines the role of international trade for job polarization, the phenomenon inwhich employment for high- and low-wage occupations increases but mid-wage occupationsdecline. With employer-employee matched data on virtually all workers and firms in Denmarkbetween 1999 and 2009, we use instrumental-variables techniques and a quasi-naturalexperiment to show that import competition is a major cause of job polarization. Importcompetition with China accounts for about 17% of the aggregate decline in mid-wage employment. Many mid-skill workers are pushed into low-wage service jobs while others moveinto high-wage jobs. The direction of movement, up or down, turns on the skill focus of workers’ education. Workers with vocational training for a service occupation can avoid moving into lowwage service jobs, and among them workers with information-technology education are far more likely to move into high-wage jobs than other workers.