Working Papers

This paper examines the labor market consequences of offshoring. I use the Danish employer-employee matched data together with the newly constructed skill measures to evaluate the effect of offshoring on wages and reallocation of workers within offshorable occupations. Offshoring reduces domestic worker wages; and increases the probability of reallocation away from the high-productivity firms to the low-productivity ones. The least skilled workers further face a greater risk of switching out to a less competitive sector. On the firm-side, offshoring improves the average skill of in-house workers at a lower cost. By estimating a worker-firm matching model, I examine the mechanisms of how offshoring affects labor market inequality and further assess the quantitative importance of various competing hypotheses such as technological change and the expansion of higher education, in addition to offshoring. I find substantially different effects: technology mainly increases the inequality between firms in terms of worker skill quality and average wages, while offshoring mitigates this rising trend.

  • The Skill Content of New Work and Specialization (with Phai Phongthiengtham)

We investigate the skill content of new work that has emerged after 2000, with the focus of the degrees of specialization: the range of tasks assigned to each occupation and the complexity (i.e. the depth of knowledge required) in the nature of tasks. We propose a model of task-based team production and division of labor where performing new tasks involves a fixed cost of operation that increases with the task complexity. We then use the job titles and job descriptions from the O*NET data and employ textual analysis to identify new work from 2000 to 2016. We find that the range of required task is narrow for new jobs that are relatively less complex, while a more extensive range of task is expected in professions with greater task complexity.

  • Ideas, Human Capital, and Entrepreneurial Choice in an Industry Equilibrium (with Dohyeon Lee)

We explain the recent decline in entrepreneurship in the U.S. through a Roy model of occupational choice between working for wages and starting up a business with exogenous arrival of ideas of random quality. The industry evolution boils down to the race between incumbents and entrants, where the declining entry rate can be interpreted as incumbents improving faster than the rate of finding good ideas. We also show that the rise in returns to education leads to an improvement in the quality of start-up ideas, as it does for the skill of wage workers. The model sheds light on how entry is related to aggregate growth, which is ultimately linked to the evolution of distribution of ideas along with innovation.