Routinization-biased technical change, globalization, and labor market polarization

There is now ample evidence that jobs and wages have been polarizing at the extremes of the skill distribution since the early 90s. Autor, Levy and Murnane (2003) have suggested that this might be due to technology substituting more easily for labor in performing routine rather than non-routine tasks. Other potential explanations include globalization. Active empirical research has now identified important stylized facts. The aim of this paper is to provide a theoretical exploration of alternative potential causes to this labor market polarization, and to identify which, if any, are consistent with the stylized facts. For this, we develop a multi-task based two-sector general equilibrium model with explicit distinction between labor skills and tasks. Labor supply is in the form of a distribution over a continuum of skills and workers endogenously sort themselves between tasks according to their respective comparative advantage. In doing so, we highlight more sophisticated potential differences between competing assumptions in the literature, in particular with respect to wage inequalities.