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Citation Information

Type Journal Article - Review of Economics and Statistics
Title Spillovers from high-skill consumption to low-skill labor markets
Volume 95
Issue 1
Publication (Day/Month/Year) 2013
Page numbers 74-86
URL http://www.econstor.eu/bitstream/10419/34649/1/54814737X.pdf
Census data show that since 1980 low-skill workers in the United States have been
increasingly employed in the provision of non-tradeable time-intensive services – such as
food preparation and cleaning – that can be broadly thought as substitutes of home
production activities. Meanwhile the wage gap between this sector and the rest of the
economy has shrunk. If skilled workers, with their high opportunity cost of time, demand more
of these time-intensive services, then wage gains at the top of the wage distribution (such as
those observed in the last three decades) are expected to raise the consumption of these
services, consistent with these stylized facts. Using both consumption expenditure data and
city-level data on employment and wages of workers of different skills, we provide several
pieces of evidence in favor of these demand shifts, and we argue that they provide a viable
explanation for the growth in wages at the bottom quantiles observed in the last fifteen years.

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