Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228320
Authors: 
Novta, Natalija
Pugacheva, Evgenia
Year of Publication: 
2019
Series/Report no.: 
LIS Working Paper Series No. 768
Abstract: 
We examine the extent to which declining manufacturing employment may have contributed to increasing inequality in advanced economies. This contribution is typically small, except in the United States. We explore two possible explanations: the high initial manufacturing wage premium and the high level of income inequality. The manufacturing wage premium declined between the 1980s and the 2000s in the United States, but it does not explain the contemporaneous rise in inequality. Instead, high income inequality played a large role. This is because manufacturing job loss typically implies a move to the service sector, for which the worker is not skilled at first and accepts a low-skill wage. On average, the associated wage cut increases with the overall level of income inequality in the country, conditional on moving down in the wage distribution. Based on a stylized scenario, we calculate that the movement of workers to low-skill service sector jobs can account for about a quarter of the increase in inequality between the 1980s and the 2000s in the United States. Had the U.S. income distribution been more equal, only about one tenth of the actual increase in inequality could have been attributed to the loss of manufacturing jobs, according to our simulations.
Subjects: 
inequality
manufacturing employment
manufacturing wage premium
structural transformation
JEL: 
D31
D63
E25
J31
L60
O33
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.