International Trade and Job Polarization: Evidence at the Worker Level
This paper examines the role of international trade for job polarization, the phenomenon in which employment for high and low wage occupations increases but mid wage occupations decline. With employer employee matched data on virtually all workers and firms in Denmark between 1999 and 2009, we use instrumental variables techniques and a quasi natural experiment to show that import competition is a major cause of job polarization. Import competition with China accounts for about 17% of the aggregate decline in mid wage employment. Many mid skill workers are pushed into low wage service jobs while others move into high wage jobs. The direction of movement, up or down, turns on the skill focus of workers' education. Workers with vocational training for a service occupation can avoid moving into low wage service jobs, and among them workers with information technology education are far more likely to move into high wage jobs than other workers.