Inequality and technological change

We study how technological change affects between‐ and within‐education‐group inequality in the United States. We develop a model with heterogeneous workers and firms in which the demand for skills is characterized by firms' recruiting behavior. We use the model to quantify the relative contrib...

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Bibliographic Details
Published in:Quantitative economics 2024-05, Vol.15 (2), p.427-451
Main Authors: Macera, Manuel, Tsujiyama, Hitoshi
Format: Article
Language:English
Subjects:
Competition
Decomposition
E24
Education
Educational attainment
firm productivity dispersion
frictional labor markets
I24
Inequality
J23
J24
J31
Labor market
Labor productivity
Manufacturers
Recruitment
Skilled workers
Skills
skill‐biased technological change
sorting
Technological change
Wages & salaries
Workers
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Summary:We study how technological change affects between‐ and within‐education‐group inequality in the United States. We develop a model with heterogeneous workers and firms in which the demand for skills is characterized by firms' recruiting behavior. We use the model to quantify the relative contribution of two types of technological change that affect the relative demand for skilled labor: technological change in firm‐specific productivity and technological change in labor productivity. We find that technological change in labor productivity, in the form of higher returns to skill in production, is the main driver of the increase in between‐ and within‐group inequality. Technological change in firm productivity, in the form of higher firm productivity dispersion, plays a less important role in explaining rising inequality, except for the increase in within‐group inequality for workers without a college degree.
ISSN:1759-7323
1759-7331
DOI:10.3982/QE1693