Technological Acceleration, Skill Transferability and the Rise in Residual Inequality
This Paper provides an interpretation for the recent rise in residual wage inequality which is consistent with the empirical observation that a sizeable part of this increase has a transitory nature, a feature that eludes standard models based on ex-ante heterogeneity in ability. In the model an acceleration in the rate of quality-improvement of equipment, like the one observed from the early 70's, reduces workers’ capacity to transfer skills from old to new machines. This force generates a rise in the cross-sectional variance of skills, and therefore of wages. Through calibration, the Paper shows that this mechanism can account for 30% of the surge in residual inequality in the US economy (or for most of its transitory component). Two key implications of the theory - faster within job wage growth and larger wage losses upon displacement - find empirical support in the data.
|Date of creation:||May 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2765. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.