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Creative Destruction and the Rise of Inequality

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  • Mendez, Rodrigue
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    Abstract

    Common wisdom interprets the rise in inequality of the last two decades as the result of a skill-biased labor demand shift. This explanation does not account for two important observations: (i) within-group inequality has also markedly risen, and (ii) the rise of inequality has been accompanied by a rise of the volatility of earnings. This paper argues that a dual labor market structure, where some workers are paid efficiency-wages can account for the empirical regularities, in the absence of skilled biased technological change. The analysis demonstrates that an unbiased innovation, as well as North-South trade, can contribute to the efficiency wage premium, and thus to wage inequality, by increasing labor turnover. Copyright 2002 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Economic Growth.

    Volume (Year): 7 (2002)
    Issue (Month): 3 (September)
    Pages: 259-81

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    Handle: RePEc:kap:jecgro:v:7:y:2002:i:3:p:259-81

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    Web page: http://www.springerlink.com/link.asp?id=102931

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    Cited by:
    1. Diana Weinhold & Usha Nair- Reichert, 2004. "Innovation, Inequality and Intellectual Property Rights," Development and Comp Systems 0410002, EconWPA, revised 04 Nov 2004.
    2. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 32(3), pages 273-299, July.
    3. Sandén, Klas, 2007. "Market Imperfections and Wage Inequality," Working Papers in Economics 264, University of Gothenburg, Department of Economics.
    4. Sandén, Klas, 2007. "Risk, Occupational Choice, and Inequality," Working Papers in Economics 263, University of Gothenburg, Department of Economics.

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