Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279054 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16356
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Low-skilled workers are concentrated in sectors that experience fast productivity growth and yet their real wages have been stagnating. We document evidence from the U.S. to show the importance of sectoral reallocations. Key to our two-sector model is the fall in the relative price of the low-skill intensive sector caused by faster productivity growth. When outputs are complements across sectors, this leads to a reallocation of low-skilled workers to the high-skill intensive sector where their marginal product is stagnant. We show that this mechanism is quantitatively important for the stagnation of low-skill real wages and their divergence from aggregate labor productivity during 1980-2010.
Subjects: 
wage stagnation
wage-productivity divergence
low-skill wage
multisector model
JEL: 
E24
J23
J31
Document Type: 
Working Paper

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