Cited by 2,111Labor market dynamics and wage inequalityGlobal trade and economicsEconomic Theory and Policy

The DOI matches its Crossref record; 33 of the 39 references it cites were found in a registry or an index; none of the 12 sources its claims cite is checked for support yet.

Explaining Job Polarization: Routine-Biased Technological Change and Offshoring

Open access
Goos, Maarten, Manning, Alan, Salomons, Anna·2014·American Economic Review

Abstract

This paper documents the pervasiveness of job polarization in 16 Western European countries over the period 1993–2010. It then develops and estimates a framework to explain job polarization using routine-biased technological change and offshoring. This model can explain much of both total job polarization and the split into within-industry and between-industry components. (JEL J21, J23, J24, M55, O33)

Overview

AI snapshot

Written from the paper’s full text.

TL;DR

Job polarization is documented across 16 Western European countries from 1993 to 2010, with rising employment shares in high- and low-paid occupations and falling shares in middling occupations. A model combining routine-biased technological change and offshoring explains much of this total polarization and its within- and between-industry components, with routine-biased technological change mattering far more than offshoring.

Key findings

  • Pooled across the 16 countries, high-paying occupations gained 5.62 percentage points of employment share, middling occupations lost 9.27 points, and low-paying occupations gained 3.65 points between 1993 and 2010. Both within-industry and between-industry components were positive for high- and low-paying groups and negative for the middling group.
  • Polarization appeared in every country studied: Table 2 shows high- and low-paying occupation shares rising relative to middling occupations in each of the 16 countries.
  • In the labor-demand estimates, an occupation one standard deviation higher in routine task intensity grew about 0.90 percentage points less fast per year (RTI coefficient −0.900 in column 1). Offshorability had a small and statistically insignificant coefficient when RTI was included (−0.013 in column 1; −0.006 in column 3), while offshorability alone was negative and significant (−0.383 in column 5) but lost the horse race against RTI.
  • The model predicted 79 percent of the observed high-paying occupation share increase (4.45/5.62), 74 percent of the middling occupation decrease (6.86/9.27), and 66 percent of the low-paying occupation increase (2.41/3.65). The estimated product-demand elasticity was 0.42, implying that demand shifts attenuate the between-industry effect by 42 percent but do not reverse it.

Methods

  • Employment data come from the European Union Labour Force Survey for 1993–2010, using weekly hours worked, two-digit ISCO occupations, and one-digit NACE industries; Germany is covered using the SIAB social-security sample for 1993–2008. Output, marginal costs, and relative prices come from the OECD STAN database.
  • Routine task intensity is based on the Autor–Dorn RTI index mapped into European occupations; offshorability uses Blinder and Krueger’s preferred professional-coder measure. Both are normalized to mean zero and standard deviation one.
  • The paper develops a two-stage production model in which industry output is produced from tasks and tasks use domestic labor plus another input whose cost changes with routineness and offshorability. It estimates labor-demand equations with occupation–industry–country fixed effects and clustered standard errors, then uses a shift-share decomposition to separate within- and between-industry changes.

Limitations

  • The paper states that the RTI and offshorability measures are imperfect, may contain different amounts of measurement error, and make it difficult to distinguish the separate effects of routine-biased technological change and offshoring beyond reasonable doubt.
  • The paper states that wage data by country, occupation, and time are poor and potentially endogenous, so wages are modeled with dummies rather than included directly. It also notes that the homotheticity assumption is restrictive, though it reports no evidence of non-homotheticity at its level of industry aggregation.
  • The paper states that the model leaves room for additional factors. Evident from the text: the constant-returns assumption is rejected in one specification because the output coefficient is below one, so the authors impose a coefficient of one in later columns; offshoring is statistically insignificant when RTI is included; and the model’s predictions do not match actual changes exactly.

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Integrity signals

Registry

Crossref · 10.1257/aer.104.8.2509

Cites

33 of 33 references verified0 citation errors · 0 not checkable

Statistics

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Verification

Claims the paper makes

30 Own result · 18 Own interpretation · 8 Not checked yet · 6 Own method · 4 No basis given

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Show all 31 claims

  • It may state two separate claims as one. 30
  • Probably not a substantial claim. 8
35 of 35
  • The authors state this as an assumption.

    Output in an industry is produced by combining tasks via a CES production function with elasticity of substitution η greater than zero.

    “Assume that output in industry i is produced by combining certain common building blocks that we will call tasks.In general, assume the following CES production function for industry i using tasks T 1 , … , T ij , … , T J as inputs:”
  • The authors state this as an assumption.

    Task output is produced using domestic labor of occupation j and one other input via a Cobb-Douglas production function common across industries, with 0<κ<1.

    “If industry i uses domestic labor of occupation j, N ij , and the other input, K ij , we assume that the total production of task j is given by a Cobb-Douglas production function that is common across industries:”
  • The authors state this as an assumption.

    The technology to produce task j and factor prices w_j and r_j are common across industries, so the marginal cost to produce task j has no industry subscript.

    “Note that it is assumed that the technology to produce task j together with factor prices w j and r j are common across industries such that the marginal cost to produce task j has no subscript i.”
  • The authors state this as an assumption.

    Routine-biased technological change and offshoring affect the cost of the other input according to ∂ log r_jt/∂t = γ_R R_j + γ_F F_j.

    “We model RBTC and offshoring as affecting the costs of the inputs other than domestic labor, in particular that (5) ∂ log r jt _ ∂ t = γ R R j + γ F F j , with R j the routineness and F j the offshorability measure discussed in Section I.”
  • The authors state this as an assumption.

    The log demand for industry output is given by log Y_ict = -ε log P_ict + log Y_ct + ξ_ict.

    “To do this, assume that the log demand for industry output is given by (7) log Y ict = -ε log P ict + log Y ct + ξ ict ,”
  • The authors state this as an assumption.

    There is monopolistic competition within each industry, with log P_ict = log μ + log c^I_ict and μ>1.

    “If there is monopolistic competition within each industry we have that log P ict = log μ + log c ict I with μ > 1 the price mark-up.”
  • The authors state this as an assumption.

    The industry output demand specification could be derived from a CES utility function with homothetic preferences.

    “This specification could be derived from an underlying CES utility function in which consumers have homothetic preferences.”
  • The authors state this as an assumption.

    Goods production has constant returns to scale.

    “However, the coefficient on log industry output is less than unity which rejects our assumption of constant returns to scale in goods production.”
  • The authors state this as an assumption.

    The model assumes homothetic demand, meaning aggregate income's level and distribution leave the cross-industry demand distribution unchanged.

    “The assumption of homotheticity implies that changes in both the level and the distribution of aggregate income have no effect on the distribution of demand across industries.”
  • The authors state this as an assumption.

    For each industry, task j's cost share is assumed to equal occupation j's employment share.

    “the simplifying assumption that the share of task j in industry costs is the same as the share of employment of occupation j in that industry.”
10 of 10

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Citations

Cites

Show all 39 references

Research works printed but not linked: 2

  1. Baumol William J, 1967, American Economic Review, 57, 415
  2. Goldin Claudia, 2009, The Evolution of U.S. Wage Differentials, 1890

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Metadata

Authors
Goos, M., Manning, A., & Salomons, A.
Affiliations
  • KU Leuven (BE)
  • London School of Economics and Political Science (GB)
  • Utrecht University (NL)
Venue
American Economic Review
Published
2014-08-01
Volume
104
Issue
8
Pages
2509-2526
ISSN
0002-8282 (ISSN-L)
OpenAlex
W1980544129
Cited by
2,111
References
39
Citations by year
2026: 214 · 2025: 217 · 2024: 228 · 2023: 199 · 2022: 234 · 2021: 240 · 2020: 224 · 2019: 166 · 2018: 161 · 2017: 100 · 2016: 68 · 2015: 40 · 2014: 14
FWCI
183.49
Type
journal article
Language
en
Open access
Locations
  • American Economic Review (publishedVersion)
  • London School of Economics and Political Science Research Online (London School of Economics and Political Science) (submittedVersion)
  • London School of Economics and Political Science Theses Online (London School of Economics and Political Science) (submittedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Utrecht University Repository (Utrecht University) (submittedVersion)
  • Lirias (KU Leuven) (submittedVersion)
Funders
Economic and Social Research Council (ES/H02123X/1)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
Keywords
job polarization, routine-biased technological change, offshoring, Western Europe, labor market structure, skill-biased technological change

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