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Ability Biased Technological Transition, Wage Inequality and Growth

Author

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  • Galor, Oded
  • Moav, Omer

Abstract

This paper develops a growth model in which the endogenous evolution of technological progress and wage inequality is consistent with the observed pattern in the United States and several European economies in the last two centuries. The model accounts for: a) the rise in wage inequality between and within groups of skilled and unskilled workers, the increase in the average wage of skilled workers despite the increase in supply, and the decline in the average wage of unskilled workers, as observed during the 1980s and 1990s; b) the rise in wage inequality within groups and the decline in wage inequality between groups during the 1970s; c) the cyclical evolution of the wage differential between skilled and unskilled workers in the last centuries; and d) the productivity slowdown.

Suggested Citation

  • Galor, Oded & Moav, Omer, 1998. "Ability Biased Technological Transition, Wage Inequality and Growth," CEPR Discussion Papers 1972, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1972
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    Citations

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    Cited by:

    1. Neves Sequeira Tiago & Reis Ana B, 2006. "Human Capital Composition, R&D and the Increasing Role of Services," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-25, June.
    2. Jürgen Meckl & Stefan Zink, 2004. "Solow and heterogeneous labour: a neoclassical explanation of wage inequality," Economic Journal, Royal Economic Society, vol. 114(498), pages 825-843, October.
    3. Oded Galor & Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1133-1191.
    4. Chen, Xi & Funke, Michael, 2013. "The dynamics of catch-up and skill and technology upgrading in China," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 465-480.
    5. Benabou, Roland, 2005. "Inequality, Technology and the Social Contract," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 25, pages 1595-1638 Elsevier.
    6. Robbins, Donald J., 2003. "The impact of trade liberalization upon inequality in developing countries : a review of theory and evidence," ILO Working Papers 993650553402676, International Labour Organization.
    7. Oded Galor & Omer Moav, 2006. "Das Human-Kapital: A Theory of the Demise of the Class Structure," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 85-117.
    8. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1001-1026.
    9. Broadberry, Stephen & Ghosal, Sayantan & Proto, Eugenio, 2011. "Is Anonymity the Missing Link Between Commercial and Industrial Revolution?," The Warwick Economics Research Paper Series (TWERPS) 974, University of Warwick, Department of Economics.
    10. Agénor, Pierre-Richard & Canuto, Otaviano, 2015. "Middle-income growth traps," Research in Economics, Elsevier, vol. 69(4), pages 641-660.
    11. repec:ilo:ilowps:365055 is not listed on IDEAS
    12. Alexandra M. de Pleijt, 2011. "The Role of Human Capital in the Process of Economic Development: The Case of England, 1307-1900," Working Papers 0021, Utrecht University, Centre for Global Economic History.
    13. Acemoglu, Daron & Aghion, Philippe & Violante, Giovanni L., 2001. "Deunionization, technical change and inequality," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 229-264, December.
    14. Joseph K. Kaboski, 2009. "Education, Sectoral Composition and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 168-182, January.
    15. Atsushi Miyake & Kazunobu Muro & Tamotsu Nakamura & Masaya Yasuoka, 2009. "Between- and within-group wage inequalities, and the advent of new technology," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 387-394, December.
    16. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
    17. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
    18. Hidalgo-Cabrillana, Ana, 2004. "Does asymmetric information promote talented people?," UC3M Working papers. Economics we042809, Universidad Carlos III de Madrid. Departamento de Economía.
    19. Rikke Ibsen & Elisabetta Trevisan & Niels Westergaard-Nielsen, 2008. "Job Mobility and Skill Transferability. Some Evidences from Denmark and a Large Italian Region," Working Papers 2008_40, Department of Economics, University of Venice "Ca' Foscari".
    20. Saint-Paul, Gilles, 2007. "Knowledge hierarchies in the labor market," Journal of Economic Theory, Elsevier, vol. 137(1), pages 104-126, November.
    21. Areendam Chanda & Carl-Johan Dalgaard, 2005. "Wage Inequality and the Rise of Services," DEGIT Conference Papers c010_016, DEGIT, Dynamics, Economic Growth, and International Trade.

    More about this item

    Keywords

    Growth; productivity slowdown; Technological Change; Wage Inequality;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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