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The Diffusion of Computers and the Distribution of Wages

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Author Info
Borghans, Lex () (ROA, Maastricht University and IZA Bonn)
ter Weel, Bas (MERIT, Maastricht University)

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Abstract

When workers adopt technology at the point where the costs equal the increased productivity, output per worker increases immediately, while the productivity benefits increase only gradually if the costs continue to fall. As a result, workers in computer-adopting labor market groups experience an immediate fall in wages due to increased supply. On the other hand, adopting workers experience wage increases with some delay. This model explains why increased computer use does not immediately lead to higher wage inequality. More specifically, the results of the model are shown to be consistent with the question why withingroup wage inequality among skilled workers as a result of computer technology adoption in the United States increased in the 1970s, while between-group wage inequality and withingroup wage inequality among the unskilled did not start to increase until the 1980s. The model also suggests that the slow diffusion of computer technology in Germany along with the absence of major changes in the wage structure in the 1980s is consistent with the more compressed German wage structure. Finally, the theoretical predictions seem to be of the right magnitude to explain the empirical quantities observed in the data.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1107.

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Length: 56 pages
Date of creation: Apr 2004
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Handle: RePEc:iza:izadps:dp1107

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Related research
Keywords: wage level and structure diffusion of computer

Other versions of this item:

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hofer, Helmut & Riedel, Monika, 2003. "Computer Use and the Wage Structure in Austria," Economics Series 147, Institute for Advanced Studies. [Downloadable!]
  2. Sabrina Wulff Pabilonia & Cindy Zoghi, 2004. "Which Workers Gain from Computer Use?," Working Papers 373, U.S. Bureau of Labor Statistics. [Downloadable!]
  3. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," Research Memoranda 003, Maastricht : ROA, Researchcentrum voor Onderwijs en Arbeidsmarkt. [Downloadable!]
  4. Bertschek, Irene & Spitz, Alexandra, 2003. "IT, Organizational Change and Wages," ZEW Discussion Papers 03-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. 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. [Downloadable!]
    Other versions:
  6. 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. [Downloadable!]
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