A Simple Model with Heterogeneous Agents First and still preliminary version.

Job polarization with rising employment shares in the highest- and lowest-wage occupations has recently been highlighted both in the U.S. (Autor, Levy and Murnane, 2003, Autor, Katz and Kearney, 2006) and in Europe (Goos and Manning, 2007, Goos and Manning and Salomons, 2009). In this paper, we propose a simple two-sector general equilibrium model with heterogeneous labor and imperfectly competitive firms that make explicit offshore outsourcing decisions in a globalized world. We investigate the effects, on the wage and the employment distributions, of alternative potential causes that have been proposed in the literature to explain job polarization. We conclude in favor of the routinization-biased technical progress proposed by Autor, Levy and Murnane (2003)