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Technological Change, Relative Wages, and Unemployment

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  • Joshua Aizenman
  • Pierre-Richard Agénor

Abstract

This paper examines the effect of skill-biased technological change on the structure of wages, the composition of employment and the level of unemployment in a two-sector economy with a heterogenous work force. Efficiency wage considerations and minimum wage legislation lead to labor market segmentation. A technological shock that reduces the demand for unskilled labor and raises the demand for skilled labor in the primary, high-wage sector is shown to increase the relative wage of skilled workers and reduce aggregate employment as well as the employment level of unskilled workers in that sector. The net effect of the shock on the employment level of skilled workers is mitigated by the existence of efficiency factors.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/111.

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Length: 36
Date of creation: 01 Sep 1994
Date of revision:
Handle: RePEc:imf:imfwpa:94/111

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References

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  1. Dimitri G. Demekas, 1994. "Labor Market Institutions and Flexibility in Italy," IMF Working Papers 94/30, International Monetary Fund.
  2. Pissarides, Christopher A. & Wadsworth, Jonathan, 1994. "On-the-job search: Some empirical evidence from Britain," European Economic Review, Elsevier, vol. 38(2), pages 385-401, February.
  3. Eswar Prasad, 1994. "The Canadian Labor Market," IMF Working Papers 94/97, International Monetary Fund.
  4. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  5. Jeremy I. Bulow & Lawrence H. Summers, 1985. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc.
  6. David A. Brauer & Susan Hickok, 1995. "Explaining the growing inequality in wages across skill levels," Economic Policy Review, Federal Reserve Bank of New York, issue Jan, pages 61-75.
  7. Chatrerji, Monojit & Sparks, Roger, 1991. "Real wages, productivity, and the cycle: An efficiency wage model," Journal of Macroeconomics, Elsevier, vol. 13(3), pages 495-510.
  8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  9. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  10. Jacob Mincer, 1991. "Human Capital, Technology, and the Wage Structure: What Do Time Series Show?," NBER Working Papers 3581, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, vol. 58(2), pages 277-296, April.
  2. Falkinger, Josef & Grossmann, Volker, 2002. "Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market," IZA Discussion Papers 523, Institute for the Study of Labor (IZA).
  3. Inoue, Tetsuya, 1998. "Impact of Information Technology and Implications for Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(2), pages 29-60, December.
  4. repec:hal:cesptp:halshs-00194165 is not listed on IDEAS
  5. De Palma, Francesco & Seegmuller, Thomas, 2005. "Dual Labor Market And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 9(03), pages 398-411, June.
  6. repec:hal:journl:halshs-00194165 is not listed on IDEAS
  7. Sneessens, Henri R., 1998. "Technological Bias and Unemployment: A Macroeconomic Perspective," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Aug 1999.
  8. Josef Falkinger & Volker Grossmann, 2001. "Work Organization, Wage Pressure in the Secondary Labor Market, and the Green Card," CESifo Working Paper Series 485, CESifo Group Munich.
  9. Pierre-Richard Agenor & Joshua Aizenman, 1996. "Wage Dispersion and Technical Progress," NBER Working Papers 5417, National Bureau of Economic Research, Inc.

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