The Evolution of Skill Demands and Wage Inequality in Industrialized Countries

These lectures will analyze the evolution of skill demands and wage structures in industrialized countries in the post-war period, focusing on the interactions among skill supplies, technological and organizational change, and international trade in both its traditional and modern manifestations. A key motivating observation is that job growth in the U.S., U.K. and continental Europe has increasingly concentrated in the tails of the skill distribution over the last two decades, with disproportionate employment gains in high-wage, high-education occupations and low-wage, low-education occupations. I argue that traditional labor demand models based upon one or two ‘skills’ are ill suited for understanding this ‘hollowing out’ of employment, and I propose an alternative framework that can potentially guide analysis and policy.

The topics to be covered are expected to include:

1. The theory of skill premia: The basic model, its empirical power, and its limitations.
2. International trade and wage setting: Skills, technologies and factor supplies in an integrated world economy.
3. Job polarization in the U.S. and Europe: Facts, a hypothesis, and a simple model of ‘Job Tasks’.
4. Integrating job tasks into the theory of international trade and outsourcing.
5. Applications:
   1. Testing technology-skill complementarity using immigration shocks;
   2. Occupational age structure as a window into the process of job polarization;
   3. The division of labor in an era of falling communications and coordination costs: Will jobs become narrower or broader?