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The diffusion of computers and the distribution of wages

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  • Borghans, Lex
  • ter Weel, Bas

Abstract

AbstractThis paper models the impact of the diffusion of computers on the wage structure, startingfrom the observation that computer use increases individual productivity, but also the supplyof goods. This latter effect negatively affects workers producing similar goods. If theproductivity gain is proportional, and the costs of a computer are equal for everyone, workerswith high wages are the first to adopt, leading to within-group wage inequality. Distinguishingskilled and unskilled workers we show that between-group wage inequality falls when the firstskilled workers adopt computers. When unskilled workers start to use computers, between-groupwage inequality increases strongly because of the increased supply of unskilled labor interms of efficiency units. The maximum level of wage inequality depends mainly onparameters regarding the distribution of the productivity of workers within and betweengroups: A large initial level of wage inequality leads to a large short term relative increase inwage inequality. In the long run, when all workers have adopted computers, both within-groupand between-group wage inequality fall to a level depending on differences in productivitygains from using computers. Empirically it is shown that the model is consistent with thepattern of wage inequality in the United States in the period 1963-2000. The current pattern ismainly determined by the short term determinants of wage inequality, making the long runimplications difficult to identify and predict.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 3 (April)
Pages: 715-748

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:3:p:715-748

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Citations

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Cited by:
  1. Gould, Eric D., 2005. "Inequality and ability," Labour Economics, Elsevier, vol. 12(2), pages 169-189, April.
  2. Spitz, Alexandra, 2004. "Using Methods of Treatment Evaluation to Estimate the Wage Effect of IT Usage," ZEW Discussion Papers 04-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  4. Borghans, Lex & ter Weel, Bas, 2008. "Understanding the Technology of Computer Technology Diffusion: Explaining Computer Adoption Patterns and Implications for the Wage Structure," IZA Discussion Papers 3792, Institute for the Study of Labor (IZA).
  5. Spitz, Alexandra & Bertschek, Irene, 2003. "IT, Organizational Change and Wages," ZEW Discussion Papers 03-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Sabrina Wulff Pabilonia & Cindy Zoghi, 2004. "Which Workers Gain from Computer Use?," Working Papers 373, U.S. Bureau of Labor Statistics.
  7. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  8. Cornelia NOVAC-UDUDEC & Cristina ENACHE & Corina SBUGHEA, 2011. "The IT Impact on the Productivity and the Organizational Performance of Firms in Romania. A model of Empirical Analysis," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 177-183.

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