Skill-Biased Technological Change, Organizational Change, and Wage Inequality
AbstractWe build a general equilibrium model of monopolistic competition with moral hazard contracting to examine the interactions among skill-biased technological change (SBTC), organizational changes, and skill premium and within-group wage inequality. While the existing literature finds that the increase in the skilled labor ratio induces SBTC and raises the skill premium, we show that SBTC leads to organizational change toward decentralization by delegating authority within firms, which inuences the reward schedule for delegated skilled managers. This organizational change results in the following: (1) the further increase in the skill premium and (2) the rapid expansion of wage inequality among skilled individuals (between skilled workers and skilled managers). Moreover, we find that there are multiple equilibria where the centralized and decentralized organizational modes simultaneously emerge at the intermediate values of the skilled labor ratio.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 84.
Length: 31 pages
Date of creation: Feb 2012
Date of revision: Feb 2012
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More information through EDIRC
Decentralization; Moral Hazard; Skill-Biased Technological Change; Skill Premium; Within-Group Wage Inequality;
Find related papers by JEL classification:
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-BEC-2012-03-21 (Business Economics)
- NEP-LAB-2012-03-21 (Labour Economics)
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