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Distributional effects of technological regime changes: hysteresis, concentration and inequality dynamics

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  • Herbert Dawid

    (Bielefeld University)

  • Jasper Hepp

    (Bielefeld University)

Abstract

In this paper, we study the effect of different types of technological regime changes on the evolution of industry concentration and wage inequality. Using a calibrated agent-based macroeconomic framework, the Eurace@Unibi model, we consider scenarios where the new regime is characterized by a finite time period of more frequent respectively more substantial changes in the frontier technology compared to the old regime. We show that under both scenarios, the regime change leads to an increase in the heterogeneity of productivity in the firm population and to increased market concentration, where effects are much less pronounced if the new regime differs from the old one with respect to the frequency of innovations. If the new regime is characterized by an increase of the size of the frontier jumps along the technological trajectory, the evolution of the wage inequality has an inverted U-shape with a large fraction of workers profiting in the very long run from high wages offered by dominant high-tech firms. Finally, it is shown that (observable) heterogeneity of worker skills plays an important role in generating these dynamic effects of technological regime changes.

Suggested Citation

  • Herbert Dawid & Jasper Hepp, 2022. "Distributional effects of technological regime changes: hysteresis, concentration and inequality dynamics," Review of Evolutionary Political Economy, Springer, vol. 3(1), pages 137-167, April.
    • Handle: RePEc:spr:revepe:v:3:y:2022:i:1:d:10.1007_s43253-021-00052-5
    DOI: 10.1007/s43253-021-00052-5
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    2. Dosi, G. & Pereira, M.C. & Roventini, A. & Virgillito, M.E., 2022. "Technological paradigms, labour creation and destruction in a multi-sector agent-based model," Research Policy, Elsevier, vol. 51(10).

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    More about this item

    Keywords

    Agent-based model; Technological regime; Inequality; Firm polarization;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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