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The Double Role Of Skilled Labor, New Technologies And Wage Inequality

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  • Hartmut Egger
  • Volker Grossmann

Abstract

We examine the relationship between the supply of skilled labor, technological change and relative wages. In accounting for the role of skilled labor in both production activities and productivity‐ enhancing ‘support’ activities we derive the following results. First, an increase in the supply of skilled labor raises the employment share of non‐production labor within firms, without lowering relative wages. Second, new technologies raise wage inequality only in so far as they give incentives to firms to reallocate skilled labor towards non‐production activities. In contrast, skill‐biased technological change of the sort usually considered in the literature does not affect wage inequality.

Suggested Citation

  • Hartmut Egger & Volker Grossmann, 2005. "The Double Role Of Skilled Labor, New Technologies And Wage Inequality," Metroeconomica, Wiley Blackwell, vol. 56(1), pages 37-57, February.
    • Handle: RePEc:bla:metroe:v:56:y:2005:i:1:p:37-57
    DOI: 10.1111/j.1467-999X.2005.00206.x
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    Cited by:

    1. Josef Falkinger & Volker Grossmann, 2003. "Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 523-544, September.
    2. Egger, Hartmut & Grossmann, Volker, 2004. "Noncognitive Abilities and Within-Group Wage Inequality," IZA Discussion Papers 1024, Institute of Labor Economics (IZA).
    3. Arindam Banik & Pradip K. Bhaumik, 2005. "Supporting the poor but skilled artisans by making assets available to them: an empirical investigation in rural India," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(1), pages 45-66.

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