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Specialization And The Skill Premium In The 20th Century

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  • Matthew F. Mitchell

Abstract

The skill premium fell substantially in the first part of the 20th century and then rose at the end of the century. I argue that these changes are connected to the organization of production. When production is organized into large plants, jobs become routinized, favoring less-skilled workers. A model is introduced that parameterizes capital's ability to do many tasks, that is, capital's flexibility. When calibrated to data on the distribution of plant sizes, the model can account for between half and two-thirds of the movement in the skill premium over the century. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Matthew F. Mitchell, 2005. "Specialization And The Skill Premium In The 20th Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 935-955, August.
    • Handle: RePEc:ier:iecrev:v:46:y:2005:i:3:p:935-955
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    References listed on IDEAS

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    1. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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    Cited by:

    1. Kurokawa, Yoshinori, 2010. "Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality," Economics Letters, Elsevier, vol. 108(2), pages 141-144, August.
    2. Volker Meier & Ioana Cosmina Schiopu, 2015. "Why Academic Quality in Higher Education Declines," CESifo Working Paper Series 5480, CESifo Group Munich.
    3. Yoshinori Kurokawa, 2011. "Variety-skill complementarity: a simple resolution of the trade-wage inequality anomaly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(2), pages 297-325, February.
    4. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
    5. Yoshinori Kurokawa, 2014. "A Simple Model of Competition Policies, Trade, and the Skill Premium," Tsukuba Economics Working Papers 2014-002, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba, revised Sep 2017.
    6. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370 Elsevier.
    7. Kausik Gangopadhyay & Atsushi Nishimura & Rupayan Pal, 2012. "Co-movement of Skill Premium and Stock Prices," Working Papers id:5174, eSocialSciences.
    8. Sandén, Klas, 2007. "Shutdown Threats, Firm Fragmentation and the Skill Premium," Working Papers in Economics 265, University of Gothenburg, Department of Economics.
    9. repec:bla:intlab:v:156:y:2017:i:1:p:113-131 is not listed on IDEAS
    10. Gangopadhyay, Kausik & Nishimura, Atsushi & Pal, Rupayan, 2016. "Can the information technology revolution explain the incidence of co-movement of skill premium and stock prices?," Economic Modelling, Elsevier, vol. 53(C), pages 107-120.
    11. Manoj Atolia & Yoshinori Kurokawa, 2014. "Entry Costs, Task Variety, and Skill Flexibility: A Simple Theory of (Top) Income Skewness," Tsukuba Economics Working Papers 2014-001, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba, revised Jul 2018.
    12. Meier, Volker & Schiopu, Ioana, 2015. "Optimal higher education enrollment and productivity externalities in a two-sector model," Journal of Public Economics, Elsevier, vol. 121(C), pages 1-13.
    13. Thomas J. Holmes & Matthew F. Mitchell, 2008. "A theory of factor allocation and plant size," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 329-351.
    14. Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.
    15. Richard Walker, 2005. "Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution," CEP Discussion Papers dp0707, Centre for Economic Performance, LSE.
    16. Sushanta K. Mallick & Ricardo M. Sousa, 2012. "Is Technology Factor-Neutral? Evidence from the US Manufacturing Sector," NIPE Working Papers 26/2012, NIPE - Universidade do Minho.
    17. Walker, Richard, 2005. "Superstars and renaissance men: specialization, market size and the income distribution," LSE Research Online Documents on Economics 19880, London School of Economics and Political Science, LSE Library.
    18. Hynninen, Sanna-Mari & Ojala, Jari & Pehkonen, Jaakko, 2013. "Technological change and wage premiums: Historical evidence from linked employer–employee data," Labour Economics, Elsevier, vol. 24(C), pages 1-11.
    19. repec:pri:cepsud:113krusell is not listed on IDEAS

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