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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.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 46 (2005)
Issue (Month): 3 (08)
Pages: 935-955

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Handle: RePEc:ier:iecrev:v:46:y:2005:i:3:p:935-955
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  1. Ellen R. McGrattan & Edward C. Prescott, 2000. "Is the stock market overvalued?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 20-40.
  2. 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.
  3. Dunne, Timothy & Foster, Lucia & Haltiwanger, John C. & Troske, Kenneth, 2002. "Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment," IZA Discussion Papers 563, Institute for the Study of Labor (IZA).
  4. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  5. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  7. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
  8. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  9. Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
  10. Markus Mobius & Raphael Schoenle, 2006. "The Evolution of Work," NBER Working Papers 12694, National Bureau of Economic Research, Inc.
  11. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
  12. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction And Firm Organization Choice," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1201-1237, November.
  13. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
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Cited by:

  1. Thomas J. Holmes & Matthew F. Mitchell, 2003. "A Theory of Factor Allocation and Plant Size," NBER Working Papers 10079, National Bureau of Economic Research, Inc.
  2. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2005. "The Effects of Technical Change on Labour Market Inequalities," CEPR Discussion Papers 5025, C.E.P.R. Discussion Papers.
  3. Richard Walker, 2005. "Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution," CEP Discussion Papers dp0707, Centre for Economic Performance, LSE.
  4. Volker Meier & Ioana Schiopu, 2013. "Optimal higher education enrollment and productivity externalities in a two-sector model," Ifo Working Paper Series Ifo Working Paper No. 170, Ifo Institute for Economic Research at the University of Munich.
  5. Kausik Gangopadhyay & Atsushi Nishimura & Rupayan Pal, 2012. "Co-movement of Skill Premium and Stock Prices," Working Papers id:5174, eSocialSciences.
  6. Kurokawa, Yoshinori, 2008. "Fixed Cost, Number of Firms, and Skill Premium: An Alternative Source for Rising Wage Inequality," MPRA Paper 14014, University Library of Munich, Germany.
  7. 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.
  8. Kurokawa, Yoshinori, 2006. "Trade and Variety-Skill Complementarity: A Simple Trade-Based Resolution of Wage Inequality Anomaly," MPRA Paper 14011, University Library of Munich, Germany.
  9. Yoshinori Kurokawa, 2011. "Variety-skill complementarity: a simple resolution of the trade-wage inequality anomaly," Economic Theory, Springer, vol. 46(2), pages 297-325, February.
  10. 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.
  11. Sandén, Klas, 2007. "Shutdown Threats, Firm Fragmentation and the Skill Premium," Working Papers in Economics 265, University of Gothenburg, Department of Economics.
  12. Richard Walker, 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.
  13. 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.

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