HEC Research Papers Series,
HEC Paris

Abstract: Labor market polarization is among the most important features in recent decades of advanced country labor markets. Yet key spatial aspects of this phenomenon remain under-explored. We develop four key facts that document the universality of polarization, a city-size difference in the shock magnitudes, a skew in the types of middle-paid jobs lost, and the role of polarization in the great urban divergence. Existing theories cannot account for these facts. Hence we develop a parsimonious theoretical account that does so by integrating elements from the literatures on labor market polarization and systems of cities with heterogeneous labor in spatial equilibrium.

Keywords: Labor Market Polarization; Great Urban Divergence; System of Cities; Inequality

JEL-codes: D63

131 pages, June 28, 2024

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