Template-Type: ReDIF-Paper 1.0
Author-Name: Jeanne Tschopp
Author-X-Name-First: Jeanne
Author-X-Name-Last: Tschopp
Author-Email: jtschopp@economics.ryerson.ca
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada

Title: The Wage Response to Shocks: The Role of Inter-Occupational Labour Adjustment

Abstract: How do cities' average wages adjust to a shock, e.g. trade-induced or technology-induced, shifting the
industrial and/or occupational composition of employment? This question is commonly answered using
a shift-share analysis, which imputes the eects of composition changes on cities' average wages in a
purely mechanical way. This paper argues that a shift-share approach can be misleading if compositional
shifts spill over into industrial and occupational wages. Using data on Germany, this paper finds that the
spillover effects from a shift in industrial and occupational composition are large and imply a total effect
on cities' average wages of 2.8 times the effect that is predicted by a shift-share exercise. In addition,
results indicate that in the case of Germany, accounting for adjustments along the occupational mix
is crucial to identify these spillovers, even if one is only interested in the eect of an industry-specific
shock.

Classification-JEL: J30
Keywords: Wages, Worker Mobility, Spillovers, Industrial and Occupational Composition, Local Labour Markets.
Length: 60 pages
Creation-Date: 2015-09
Number: 054
File-URL: http://economics.ryerson.ca/workingpapers/wp054.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp054