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Creative Destruction and the Rise of Inequality

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  • Mendez, Rodrigue

Abstract

Common wisdom interprets the rise in inequality of the last two decades as the result of a skill-biased labor demand shift. This explanation does not account for two important observations: (i) within-group inequality has also markedly risen, and (ii) the rise of inequality has been accompanied by a rise of the volatility of earnings. This paper argues that a dual labor market structure, where some workers are paid efficiency-wages can account for the empirical regularities, in the absence of skilled biased technological change. The analysis demonstrates that an unbiased innovation, as well as North-South trade, can contribute to the efficiency wage premium, and thus to wage inequality, by increasing labor turnover. Copyright 2002 by Kluwer Academic Publishers

Suggested Citation

  • Mendez, Rodrigue, 2002. "Creative Destruction and the Rise of Inequality," Journal of Economic Growth, Springer, vol. 7(3), pages 259-281, September.
  • Handle: RePEc:kap:jecgro:v:7:y:2002:i:3:p:259-81
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    Cited by:

    1. Weinhold, Diana & Nair-Reichert, Usha, 2009. "Innovation, Inequality and Intellectual Property Rights," World Development, Elsevier, vol. 37(5), pages 889-901, May.
    2. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 273-299, June.
    3. Antonio Cabrales, 2010. "The causes and economic consequences of envy," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(4), pages 371-386, September.
    4. Alberto Bucci & Fabio Fiorillo & Stefano Staffolani, 2003. "Can Market Power Influence Employment, Wage Inequality and Growth?," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 129-160, May.
    5. repec:spr:jknowl:v:8:y:2017:i:1:d:10.1007_s13132-016-0363-y is not listed on IDEAS
    6. Sirine Mnif, 2015. "Impact of Inequalities on Technological Changes: Case of the Developing Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(3), pages 460-478, March.
    7. Sandén, Klas, 2007. "Risk, Occupational Choice, and Inequality," Working Papers in Economics 263, University of Gothenburg, Department of Economics.
    8. Sandén, Klas, 2007. "Market Imperfections and Wage Inequality," Working Papers in Economics 264, University of Gothenburg, Department of Economics.

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