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Diversified Occupations, Offshoring and Labor Market Volatility

Bardhan, Ashok and Tang, John (2006): Diversified Occupations, Offshoring and Labor Market Volatility.

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Abstract

Are occupations that are well diversified across sectors less volatile and less susceptible to external shocks? Most external shocks, like manufacturing offshoring and oil shocks, impact the labor market along sectoral lines, i.e. they impact product and output markets; consequently, they affect employment in various occupations. Some shocks, however, like services offshoring, affect horizontals or occupations. We suggest a new approach to assess the vulnerability of jobs due to such shocks. We find that an occupation spread across multiple industries is less volatile in terms of numbers employed and the average wage. Including various measures of an occupation's offshorability does not affect the results; however, geographically clustered occupations seem more “at-risk,” after accounting for sectoral diversification.

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