IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/5025.html
   My bibliography  Save this paper

The Effects of Technical Change on Labour Market Inequalities

Author

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

Abstract

In this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labour market. A key focus is on the rise of US wage inequality over the past 30 years. However, we also pay attention to how Europe did not experience changes in wage inequality but instead saw a sharp increase in unemployment and an increased labour share of income, variables that remained stable in the US We hypothesize that these changes in labour market inequalities can be accounted for by the wave of capital-embodied technological change, which we also document. We propose a variety of mechanisms based on how technology increases the returns to education, ability, experience, and ‘luck’ in the labour market. We also discuss how the wage distribution may have been indirectly influenced by technical change through changes in certain aspects of the organization of work, such as the hierarchical structure of firms, the extent of unionization, and the degree of centralization of bargaining. To account for the US-Europe differences, we use a theory based on institutional differences between the United States and Europe, along with a common acceleration of technical change. Finally, we briefly comment on the implications of labour market inequalities for welfare and for economic policy.

Suggested Citation

  • Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2005. "The Effects of Technical Change on Labour Market Inequalities," CEPR Discussion Papers 5025, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5025
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5025
    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 subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    inequality; institutions; labour market; skills; technological change;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5025. 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: (). General contact details of provider: https://www.cepr.org .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.