IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Vintage Capital as an Origin of Inequalities

  • Hornstein, Andreas
  • Krusell, Per
  • Violante, Giovanni L

Does capital-embodied technological change play an important role in shaping labour market inequalities? This Paper addresses the question in a model with vintage capital and search/matching frictions where costly capital investment leads to large heterogeneity in productivity among vacancies in equilibrium. The Paper first demonstrates analytically how both technology growth and institutional variables affect equilibrium wage inequality, income shares and unemployment. Next, it applies the model to a quantitative evaluation of capital as an origin of wage inequality: at the current rate of embodied productivity growth a 10-year vintage differential in capital translates into a 6% wage gap. The model also allows a US – Continental Europe comparison: an embodied technological acceleration interacted with different labour market institutions can explain a significant part of the differential rise in unemployment and capital share and some of the differential dynamics in wage inequality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3596.

in new window

Date of creation: Oct 2002
Date of revision:
Handle: RePEc:cpr:ceprdp:3596
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:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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.
  2. Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-91, April.
  4. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
  5. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 243-284, April.
  6. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
  7. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  8. repec:oup:qjecon:v:117:y:2002:i:1:p:339-376 is not listed on IDEAS
  9. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 497-530, April.
  10. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
  11. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-65, April.
  12. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  13. Den Haan, Wouter & Haefke, Christian & Ramey, Gary, 2001. "Shocks and Institutions in a Job Matching Model," CEPR Discussion Papers 2970, C.E.P.R. Discussion Papers.
  14. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 477-94, July.
  15. Dale W. Jorgenson, 2001. "Information Technology and the U. S. Economy," Harvard Institute of Economic Research Working Papers 1911, Harvard - Institute of Economic Research.
  16. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  17. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  18. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
  19. Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "1974," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 49-95, June.
    • Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
  20. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  21. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  22. Caballero, R.J. & Hammour, M.L., 1997. "Jobless Growth: Appropriability, Factor-Substitution, and Unemployment," Working papers 97-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  23. repec:oup:qjecon:v:112:y:1997:i:1:p:253-90 is not listed on IDEAS
  24. Gordon, Robert J, 1995. "Is There a Trade-off between Unemployment and Productivity Growth?," CEPR Discussion Papers 1159, C.E.P.R. Discussion Papers.
  25. repec:oup:restud:v:61:y:1994:i:3:p:477-94 is not listed on IDEAS
  26. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
  27. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  28. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  29. Hans Hansen, 1998. "Transition from unemployment benefits to social assistance in seven European OECD countries," Empirical Economics, Springer, vol. 23(1/2), pages 5-30.
  30. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3596. 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 address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.