IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Vintage capital as an origin of inequalities

  • Andreas Hornstein
  • Per Krusell
  • Giovanni L. Violante

Does capital-embodied technological change play an important role in shaping labor market inequalities? This paper addresses the question in a model with vintage capital and search / matching frictions where costly capital investment leads to large heterogeneity in productivity among vacancies in equilibrium. The paper first demonstrates analytically how both technology growth and institutional variables affect equilibrium wage inequality, income shares and unemployment. Next, it applies the model to a quantitative evaluation of capital as an origin of wage inequality: at the current rate of embodied productivity growth a 10-year vintage differential in capital translates into a 6% wage gap. The model also allows a U.S. – continental Europe comparison: an embodied technological acceleration interacted with different labor market institutions can explain a significant part of the differential rise in unemployment and capital share and some of the differential dynamics in wage inequality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.frbsf.org/economics/conferences/0211/violante.pdf
Download Restriction: no

Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2002)
Issue (Month): Nov ()
Pages:

as
in new window

Handle: RePEc:fip:fedfpr:y:2002:i:nov:x:5
Contact details of provider: Postal:
P.O. Box 7702, San Francisco, CA 94120-7702

Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
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.:

as in new window
  1. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
  2. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-specific technical change in the US (1947-2000): measurement and macroeconomics consequences," Finance and Economics Discussion Series 2002-10, Board of Governors of the Federal Reserve System (U.S.).
  3. Mark Doms & Timothy Dunne & Kenneth R. Troske, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 253-290.
  4. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-91, April.
  5. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June.
  6. Robert J. Gordon, 1995. "Is There a Tradeoff between Unemployment and Productivity Growth?," NBER Working Papers 5081, National Bureau of Economic Research, Inc.
  7. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," NBER Working Papers 6416, National Bureau of Economic Research, Inc.
  8. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  9. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  10. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers 3023, C.E.P.R. Discussion Papers.
  11. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  12. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  13. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
  14. Hans Hansen, 1998. "Transition from unemployment benefits to social assistance in seven European OECD countries," Empirical Economics, Springer, vol. 23(1/2), pages 5-30.
  15. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  16. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  17. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  18. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  19. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  20. Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
  21. repec:fth:starer:98-16 is not listed on IDEAS
  22. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
  23. Wouter Den Haan & Christian Haefke & Garey Ramey, 2001. "Shocks and Institutions in a Job Matching Model," NBER Working Papers 8463, National Bureau of Economic Research, Inc.
  24. repec:fth:starer:9816 is not listed on IDEAS
  25. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  26. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-65, April.
  27. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  28. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
  29. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
  30. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
  31. Dale W. Jorgenson, 2001. "Information Technology and the U. S. Economy," Harvard Institute of Economic Research Working Papers 1911, Harvard - Institute of Economic Research.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:2002:i:nov:x:5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noah Pollaczek)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.