Working Paper: CEPR ID: DP18546
Authors: Ester Faia; Ekaterina Shabalina
Abstract: We study the consequences of technological progress for the dynamic of job flows and wage growth along the income distribution. Estimating elasticities of wages and job flows across income percentiles, with CPS data and local projections, we find that technological shocks (aggregate and sectoral) hit dis-proportionally more separation, gross flows and wage growth of bottom earners and of routinary workers, while those for top earners are sheltered from fluctuations. The asymmetric response points to a selection channel. We build a general equilibrium model with uninsurable risk, skill heterogeneity, occupational choice, and occupational labour demand that varies across sectors. In the model income and wealth affect the transition probabilities: for this reason recessions (expansions) reduce (increase) participation and mobility to higher paying jobs, or for which workers have higher comparative advantage (or else to opportunity), and more so for bottom earners and routinary workers. The model quantitatively replicates the empirical estimates of the elasticities.
Keywords: occupational mobility; uninsurable income shocks; heterogenous skills; wage inequality; discrete choice optimization; distributional consequences of technology
JEL Codes: J22; J23; J31; J62; E21; D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological shocks (O33) | Separation rates of bottom earners (J31) |
| Technological shocks (O33) | Gross job flows of bottom earners (J69) |
| Economic contractions (E32) | Separation rates of bottom earners (J31) |
| Technological shocks (O33) | Wage growth of bottom earners (J31) |
| Economic shocks (F69) | Wage inequality (J31) |
| Technological shocks (O33) | Job flows of top earners (J62) |