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Technological changes, wage inequality and skill premiums: Evidence over three centuries

Author

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  • Ojala, Jari
  • Pehkonen, Jaakko

Abstract

This study analyses the evolution of wages and occupational composition of labour over three centuries, from 1755 to 1914, using worker-workplace data. The data from one industry offers a unique view on long-term trends in skill composition, wage inequality and occupational wage premiums. A major shift in the production technology, a shift from sail-only vessels to steam-operated vessels, in turn, allows the examination the popular skill-biased technological change (SBTC) hypothesis in a well-defined setting. We find that (i) technological change had both a new-skill-demanding aspect, showing up as an increase in the demand for skilled engineers, and a skill-replacing aspect, resulting in a decline in the demand for skilled able-bodied seamen and an increase in unskilled engine room operatives, (ii) increasing wage inequality in the latter part of the 18th century was associated with the emergence of new skilled occupations and rising wages of skilled seamen, and (iii) wage inequality evolved slowly over time and there were different, declining and rising phases in wage inequality.

Suggested Citation

  • Ojala, Jari & Pehkonen, Jaakko, 2009. "Technological changes, wage inequality and skill premiums: Evidence over three centuries," Working Papers 5, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:5
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    File URL: https://www.doria.fi/handle/10024/148744
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    Cited by:

    1. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    2. Korkeamäki, Ossi, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, VATT Institute for Economic Research.
    3. Ossi Korkeamäki & Tomi Kyyrä, 2012. "Institutional rules, labour demand and retirement through disability programme participation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 439-468, January.
    4. Hynninen, Sanna-Mari & Ojala, Jari & Pehkonen, Jaakko, 2013. "Technological change and wage premiums: Historical evidence from linked employer–employee data," Labour Economics, Elsevier, vol. 24(C), pages 1-11.

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