Abstract
This paper analyzes the role of specialized high-skilled labor in the disproportionate growth of the service sector. Empirically, the importance of skill-intensive services has risen during a period of increasing relative wages and quantities of high-skilled labor. We develop a theory in which demand shifts toward more skill- intensive output as productivity rises, increasing the importance of market services relative to home production. Consistent with the data, the theory predicts a rising level of skill, skill premium, and relative price of services that is linked to this skill premium.
| Original language | English |
|---|---|
| Pages (from-to) | 2540-2569 |
| Number of pages | 30 |
| Journal | American Economic Review |
| Volume | 102 |
| Issue number | 6 |
| DOIs | |
| State | Published - Oct 2012 |