American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
The Effect of Product Demand on Inequality: Evidence from the United States and the United Kingdom
American Economic Journal: Applied Economics
vol. 7,
no. 3, July 2015
(pp. 221–47)
Abstract
Using Consumer Expenditure Survey data this paper shows that more educated workers demand more high-skill-intensive services and, to a lesser extent, more very low-skill-intensive services (such as personal services). Additional evidence at the Metropolitan Statistical Area (MSA) level shows that this "education elasticity of demand" mechanism can explain part of the correlation between the share of college-educated workers in a city and the employment share of service industries. The parametrization of a simple model suggests that this induced demand shift can explain around 6.5 percent of the relative demand shift in the United States between 1984 and 2002. Similar results are provided for the United Kingdom. (JEL D12, J24, J31, L84)Citation
Leonardi, Marco. 2015. "The Effect of Product Demand on Inequality: Evidence from the United States and the United Kingdom." American Economic Journal: Applied Economics, 7 (3): 221–47. DOI: 10.1257/app.20130359Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- L84 Personal, Professional, and Business Services
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