Globalization and Labor Markets Kiel Institute for the World Economy, September 7-11, 2015 Prof. Dr. David Dorn, University of Zurich and CEPR (david.dorn@econ.uzh.ch) This seminar examines how global economic integration affects labor markets in the United States and in Western Europe, with emphasis on mechanisms related to international trade and offshoring, adoption of new technologies, and international migration. In considering these mechanisms, the course will build on theoretical models and then move to empirical estimation. The syllabus below is preliminary. The final syllabus will contain readings of two sorts. The first, designated by an asterisk, will be emphasized in the lectures. Readings with no asterisk may be discussed briefly, but are primarily offered as a guide to the literature. I. Changes in the Wage Structure (*) Autor, David H., Lawrence F. Katz and Melissa S. Kearney. 2008. Trends in U.S. Wage Inequality: Re-Assessing the Revisionists. Review of Economics and Statistics, 90, 300-323. (*) Dustmann, Christian, Johannes Ludsteck and Uta Schöenberg. 2009. Revisiting the German Wage Structure. Quarterly Journal of Economics, 124, 843-881. (*) Piketty, Thomas and Emmanuel Saez. Income Inequality in the United States, 1913 1998. Quarterly Journal of Economics, 118, 2003, 1-40. Acemoglu, Daron. 2003. Cross-Country Inequality Trends. Economic Journal, 70, 199-230. Bonhomme, Stéphane and Laura Hospido. 2012. "The Cycle of Earnings Inequality: Evidence from Spanish Social Security Data." IZA Discussion Paper no. 6669. June. Card, David, Jörg Heining and Patrick Kline. 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality." IZA Discussion Paper no. 7200. February. Goldin, Claudia and Lawrence F. Katz. 2007. Long-Run Changes in the Wage Structure: Narrowing, Widening, Polarizing. Brookings Papers on Economic Activity, no. 2, 135-167. Goldin, Claudia and Lawrence F. Katz. 2009. The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005. NBER Working Paper No. 12984, March. Gottschalk, Peter and Timothy M. Smeeding. 1997. Cross-National Comparisons of Earnings and Income Inequality. Journal of Economic Literature, 35, 633-687. Katz, Lawrence F. and David H. Autor. 1999. Changes in the Wage Structure and Earnings Inequality. Handbook of Labor Economics, 3, 1463-1555. Lemieux, Thomas. 2006. Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill? American Economic Review, 96, 461-498. 1
II. The Early Debate on Causes of Wage Inequality A. Supply, Demand and Institutions (*) Katz, Lawrence F. and Kevin M. Murphy. 1992. Changes in Relative Wages, 1963-1987: Supply and Demand Factors. Quarterly Journal of Economics, 107, 35-78. Blau, Francine D. and Lawrence M. Kahn. 1996. International Differences in Male Wage Inequality: Institutions versus Market Forces. Journal of Political Economy, 104, 791-837. Blau, Francine D. and Lawrence M, Kahn. 2005. Do Cognitive Test Scores Explain Higher US Wage Inequality? Review of Economics and Statistics, 87, 1984-1993. Bound, John and George Johnson. 1992. Changes in the Structure of Wages in the 1980s: An Evaluation of Alternative Explanations. American Economic Review, 82, 371-392. Card, David and John DiNardo. 2002. Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles. Journal of Labor Economics, 20, 733-783. Card, David and Thomas Lemieux. 2001. Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis. Quarterly Journal of Economics, 116, 705-746. DiNardo, John, Nicole Fortin and Thomas Lemieux. 1996. Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach. Econometrica, 64, 1001-1044. Juhn, Chinhui and Kim Dae I. 1999. The Effects of Rising Female Labor Supply on Male Wages. Journal of Labor Economics, 17, 23-48. Krusell, Per, Lee Ohanian, Victor Rios-Rull and Giovanni Violante. 2000. Capital-Skill Complementarity and Inequality. Econometrica, 6, 1029-1053. Lee, David. 1999. Wage Inequality in the U.S. During the 1980 s: Rising Dispersion or Falling Minimum Wage. Quarterly Journal of Economics, 114, 941-1024. Leuven, Edwin, Hessel Oosterbeek and Hans van Ophem. 2004. Explaining International Differences in Male Skill Wage Differentials by Differences in Demand and Supply of Skill. Economic Journal, 114, 466-486. Machin, Stephen and John Van Reenen. 1998. Technology and Changes in Skill Structure: Evidence from Seven OECD Countries. Quarterly Journal of Economics, 113, 1215-44. B. Heckscher-Ohlin: Linking Trade, Prices and Wages (*) Berman, Eli, John Bound and Steven Machin. 1998. Implications of Skill-Biased Technological Change: International Evidence. Quarterly Journal of Economics, 113, 1245-1279. (*) Krugman, Paul. 2000. Technology, Trade and Factor Prices. Journal of International Economics, 50, 51-71. Feenstra, Robert C. and Gordon H. Hanson. 1999. The Impact of Outsourcing and High-Technology Capital on Wages. Quarterly Journal of Economics, 114, 907-940. 2
Haskel, Jonathan, Robert Z. Lawrence, Edward E. Leamer and Matthew J. Slaughter. 2012. Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts. Journal of Economic Perspectives, 26, 119-140. Lawrence, Robert Z. and Matthew J. Slaugher. 1993. International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup? Brookings Papers on Economic Activity 2, 161-226. Leamer, Edward E. 2000. What s the Use of Factor Contents? Journal of International Economics, 50, 17-49. III. Technological and Organizational Change A. Computers, Tasks and Skills (*) Acemoglu, Daron and David H. Autor. 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings." in: Orley Ashenfelter and David Card (eds.): Handbook of Labor Economics Vol. 4. Amsterdam: Elsevier. (*) Autor, David H., Frank Levy and Richard J. Murnane. 2003. The Skill Content of Recent Technological Change: An Empirical Exploration. Quarterly Journal of Economics, 116, 1279-1333. Autor, David H. and David Dorn. 2013. The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market. American Economic Review, 103(5): 1553-1597. Autor, David H., Lawrence F. Katz and Melissa Schettini Kearney. 2006. The Polarization of the U.S. Labor Market. American Economic Review, Papers and Proceedings, 96, 189-194. Autor, David H., Frank Levy and Richard J. Murnane. 2002. Upstairs, Downstairs: Computers and Skills on Two Floors of a Large Bank. Industrial and Labor Relations Review, 55, 2002, 432-447. Goos, Maarten and Alan Manning. 2007. Lousy and Lovely Jobs: The Rising Polarization of Work in Britain. Review of Economics and Statistics 89(1), 118-133. Goos, Maarten, Alan Manning and Anna Salomons. 2009. The Polarization of the European Labor Market. American Economic Review, Papers and Proceedings, 99, 58-63. Nordhaus, William. 2001. Two Centuries of Progress in Computing. Journal of Economic History, 67, 128-159. Michaels, Guy, Ashwini Natraj and John Van Reenen. Forthcoming. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 Years." Review of Economics and Statistics. Spitz-Oener, Alexandra. 2006. Technical Change, Job Tasks and Rising Educational Demands: Looking Outside the Wage Structure. Journal of Labor Economics, 2006, 24, 235-270. B. Management and Organization (*) Bloom, Nicholas and John Van Reenen. 2007. Measuring and Explaining Management Practices across Firms and Countries. Quarterly Journal of Economics, 122, 1351-1408. 3
(*) Bloom, Nicholas, Raffaella Sadun and John Van Reenen. 2012. Management as a Technology? Working Paper, Stanford University, July. Acemoglu, Daron. 2002. Directed Technical Change. Review of Economic Studies, 69, 781-809. Bartel, Ann P., Casey Ichniowski, and Kathryn L. Shaw. 2007. How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement and Worker Skills. Quarterly Journal of Economics, 122, 1721-1758. Bloom, Nicholas, Benn Eifert, David McKenzie, Aprajit Mahajan and John Roberts. 2013. Does Management Matter? Evidence from India. Quarterly Journal of Economics, 128, 1-51. Bresnahan, Timothy F., Erik Brynolfsson, and Lorin M. Hitt. 2002. Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-level Evidence. Quarterly Journal of Economics, 117, 339-376. Caroli, Eve and John van Reenen. 2001. Skill-Biased Organizational Change: Evidence from a Panel of British and French Establishments. Quarterly Journal of Economics, 116, 1449-1492. IV. Trade, Offshoring and Labor Market Outcomes A. Theoretical Foundations: Comparative Advantage, Geography and Trade (*) Eaton, Jonathan and Samuel Kortum. 2002. Technology, Geography and Trade. Econometrica 70, 1741-1779. (*) Eaton, Jonathan and Samuel Kortum. 2012. Putting Ricardo to Work. Journal of Economic Perspectives, 26, 65-90. Burstein, Ariel and Jonathan Vogel. 2012. International Trade, Technology, and the Skill Premium. Working Paper UCLA, April. Helpman, Elhanan, Oleg Itskhoki and Stephen Redding. 2010. Inequality and Unemployment in a Global Economy. Econometrica, 78, 1239-1283. B. Empirical Evidence: Trade Shocks and Labor Market Outcomes (*) Autor, David H., David Dorn and Gordon Hanson. 2013. The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review, 103, 2121-2168. (*) Dauth, Wolfgang, Sebastian Findeisen and Jens Suedekum. 2014. The Rise of the East and the Far East: German Labor Markets and Trade Integration. Journal of the European Economic Association, 12, 1643-1675. Acemoglu, Daron, David H. Autor, David Dorn, Gordon H. Hanson and Brendan Price. 2014. Import Competition and the Great U.S. Employment Sag of the 2000s. Working Paper, University of Zurich, August. Autor, David H., David Dorn, Gordon H. Hanson and Jae Song. 2014. Trade Adjustment: Worker Level Evidence. Quarterly Journal of Economics, 129, 1799-1860. 4
Dix-Carneiro, Rafael. 2014. Trade Liberalization and Labor Market Dynamics. Econometrica, 82, 825-885. Dix-Carneiro, Rafael and Brian Kovak. 2014. Trade Reform and Regional Dynamics: Evidence from 25 Years of Brazilian Matched Employer-Employee Data. Working Paper, Duke University, November. Hanson, Gordon H. 2012. The Rise of the Middle Kingdoms: Emerging Economies in Global Trade. Journal of Economic Perspectives, 26, 41-64. McLaren, John and Shushanik Hakobyan. 2012. Looking for Local Labor Market Effects of the NAFTA. Working Paper, University of Virginia, July. Pierce, Justin R. and Peter K. Schott. 2012. The Surprisingly Swift Decline of U.S. Manufacturing Employment. NBER Working Paper no. 18566. Verhoogen, Eric. 2008. Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector. Quarterly Journal of Economics, 123, 489-530. C. Offshoring (*) Becker, Sascha O., Karolina Ekholm and Marc-Andreas Muendler. 2013. Offshoring and the Onshore Composition of Tasks and Skills. Journal of International Economics, 90, 91-106. (*) Hummels, David, Rasmus Jorgensen, Jakob Munch and Chong Xiang. 2014. The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data. American Economic Review, 104, 1597-1629. Blinder, Alan S. and Alan B. Krueger. 2013. Alternative Measures of Offshorability: A Survey Approach. Journal of Labor Economics, 31, S97-S128. Crino, Rosario. 2010. Service Offshoring and White-Collar Employment. Review of Economic Studies, 77, 595-632. Firpo, Sergio, Nicole Fortin and Thomas Lemieux. 2011. Occupational Tasks and Changes in the Wage Structure. IZA Discussion paper no. 5542, February. Goos, Maarten, Alan Manning and Anna Salomons. 2014. Explaining Job Polarization: Routine-Biased Technological Change and Offshoring. American Economic Review, 104, 2509-2526. Grossman, Gene and Esteban Rossi-Hansberg. 2008. Trading Tasks: A Simple Theory of Outsourcing. American Economic Review, 98, 1978-1997. V. Immigration (*) Borjas, George. 2003. The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market. Quarterly Journal of Economics, 118, 1335 1374. (*) Card, David. 1990. The Impact of the Mariel Boatlift on the Miami Labor Market. Industrial and Labor Relations Review, 43, 245-257. 5
(*) Lewis, Ethan G. 2011. "Immigration, Skill Mix, and Capital-Skill Complementarity. Quarterly Journal of Economics, 126, 1029-1069. (*) Lewis, Ethan G. and Giovanni Peri. 2014. Immigration and the Economy of Cities and Regions. NBER Working Paper no. 20428, August. Bleakley, Hoyt and Aimee Chin. 2004. "Language Skills and Earnings: Evidence from Childhood Immigrants." Review of Economics and Statistics, 86, 481-496. Borjas, George J., Jeffrey Grogger, and Gordon H. Hanson. Forthcoming. Substitution between Immigrants, Natives, and Skill Groups. Journal of European Economic Association. Card, David. 2009. Immigration and Inequality. American Economic Review Papers and Proceedings, 99, 1-21. Chiquiar, Daniel and Gordon H. Hanson. 2005. International Migration, Self-Selection, and the Distribution of Wages. Journal of Political Economy, 113, 239-281. Cortés, Patricia. 2008. "The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data." Journal of Political Economy, 116, 381-422. Cortés, Patricia and José Tessada. 2011. "Low-Skilled Immigration and the Labor Supply of Highly Skilled Women." American Economic Journal: Applied Economics, 3(3), 88-123. D'Amuri, Francesco and Giovanni Peri. 2012. "Immigration, Jobs and Employment Protection: Evidence from Europe." IZA Discussion Paper, no. 17139. Glitz, Albrecht. 2012. The Labor Market Impact of Immigration: A Quasi-Experiment Exploiting Immigrant Location Rules in Germany. Journal of Labor Economics, 30, 175-213. Hanson, Gordon H. 2012. "The Economic Consequences of the International Migration of Labor. Annual Review of Economics, 1, 179-208. Lewis, Ethan G. 2005. How Do Local Labor Markets in the U.S. Adjust to Immigration? Federal Reserve Bank of Philadelphia Business Review, Q1, 16-25. Lewis, Ethan G. 2011. "Immigrant-Native Substitutability: The Role of Language Ability." NBER Working Paper no. 17609, November. Lubotsky, Darren. 2007. "Chutes or Ladders? A Longitudinal Analysis of Immigrant Earnings." Journal of Political Economy, 115, 820-867. Ottaviano, Gianmarco and Giovanni Peri. 2012. Rethinking the Effect of Immigration on Wages. Journal of the European Economic Association, 10, 152-197. Peri, Giovanni and Chad Sparber. 2009. Task Specialization, Immigration and Wages. American Economic Journal: Applied Economics, 1, 135-169. VI. Intergenerational Persistence of Labor Market Outcomes (*) Björkland, Anders, Mikael Lindahl and Erik Plug. 2006. The Origins of Intergenerational Associations: Lessons from Swedish Adoption Data. Quarterly Journal of Economics, 121, 999-1028. 6
(*) Chetty, Raj, Nathaniel Hendren, Patrick Kline, Emmanuel Saez and Nicholas Turner. Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility. NBER Working Paper no. 19844, January. (*) Solon, Gary. 2002. "Cross-Country Differences in Intergenerational Earnings Mobility." Journal of Economic Perspectives, 16, 59-66. Behrman, Jere R. and Mark R. Rosenzweig. 2002. "Does Increasing Women's Schooling Raise the Schooling of the Next Generation?" American Economic Review, 92, 323-334. Black, Sandra E., Paul J. Devereux and Kjell G. Salvanes. 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital." American Economic Review, 95, 437-449. Black, Sandra E. and Paul J. Devereux. 2010. "Recent Developments in Intergenerational Mobility." IZA Discussion Paper No. 4866. April. Bowles, Samuel and Herbert Gintis. 2002. "The Inheritance of Inequality." Journal of Economic Perspectives, 16, 3-30. Chetty, Raj, Nathaniel Hendren, Patrick Kline, Emmanuel Saez. Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States. NBER Working Paper no. 19843, January. Cesarini, David, Christopher T. Dawes, Magnus Johannesson, Paul Lichtenstein and Bjorn Wallace. 2009. Genetic Variation in Preferences for Giving and Risk-Taking. Quarterly Journal of Economics, 124, 809-842. Corak, Miles. 2013. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility." Journal of Economic Perspectives, 27(3): 79-102. Dickens, William and James Flynn. 2001. Heritability Estimates versus Large Environmental Gains: The IQ Paradox Resolved. Psychological Review, 108, 346-369. Kopczuk, Wojciech, Emmanuel Saez and Jae Song. 2010. Earnings Mobility and Inequality in the United States: Evidence from Social Security Data since 1937. Quarterly Journal of Economics, 125, 91-128. Lee, Chul-In and Gary Solon. 2009. "Trends in Intergenerational Income Mobility." Review of Economics and Statistics, 91, 766-772. Plug, Erik and Wim Vijverberg. 2003. "Schooling, Family Background, and Adoption: Is It Nature or Nurture?" Journal of Political Economy, 111, 611-641. Sacerdote, Bruce. 2007. How Large are the Effects from Changes in Family Environment? A Study of Korean American Adoptees. Quarterly Journal of Economics, 122, 119-157. VII. Top Incomes and the Economics of Superstars (*) Atkinson, Anthony B., Thomas Piketty and Emmanuel Saez. 2011. "Top Incomes in the Long Run of History." Journal of Economic Literature, 49(1), 3-71. (*) Gabaix, Xaver and Augustin Landier. Why Has CEO Pay Increased So Much? Quarterly Journal of Econonomics,, 123, 2008, 49-100. 7
(*) Rosen, Sherwin. 1981. The Economics of Superstars. American Economic Review, 71, 845-858. (*) Terviö, Marko. 2009. Superstars and Mediocrities: Market Failure in the Discovery of Talent. Review of Economic Studies, 72, 829-850. Bertrand, Marianne. CEOs. Annual Review of Economics, 1, 2009, 1-29. Bertrand, Marianne and Sendhil Mullainathan. Are CEOs Rewarded for Luck? The Ones Without Principles Are. Quarterly Journal of Econonomics,, 116, 2001, 901-932. Philippon, Thomas and Ariell Reshef. 2012. Wages and Human Capital in the U.S. Financial Industry: 1909-2006. Quarterly Journal of Economics, 127, 1551-1609. Terviö, Marko. 2008. The Difference that CEOs Make: An Assignment Model Approach. American Economic Review, 98, 642-668. 8