IDEAS home Printed from https://ideas.repec.org/p/fip/fedrwp/04-08.html
   My bibliography  Save this paper

The effects of technical change on labor market inequalities

Author

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

Abstract

In this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labor market. A key focus is on the rise of U.S. 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 labor share of income, variables that remained stable in the U.S. We hypothesize that these changes in labor 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 labor 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 U.S.-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 labor market inequalities for welfare and for economic policy.

Suggested Citation

  • Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2004. "The effects of technical change on labor market inequalities," Working Paper 04-08, Federal Reserve Bank of Richmond.
  • Handle: RePEc:fip:fedrwp:04-08
    as

    Download full text from publisher

    File URL: http://www.richmondfed.org/publications/research/working_papers/2004/wp_04-8.cfm
    Download Restriction: no

    File URL: http://www.richmondfed.org/publications/research/working_papers/2004/pdf/wp04-8.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    Labor market; Technology;

    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - 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:fip:fedrwp:04-08. 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://edirc.repec.org/data/frbrius.html .

    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.