IDEAS home Printed from https://ideas.repec.org/p/gla/glaewp/2008_23.html
   My bibliography  Save this paper

Technology Policy and Wage Inequality

Author

Listed:
  • Guido Cozzi
  • Giammario Impullitti

Abstract

In this paper we argue that government procurement policy played a role in stimulating the wave of innovation that hit the US economy in the 1980s, as well as the simultaneous increase in inequality and in education attainment. Since the early 1980s U.S. policy makers began targeting commercial innovations more directly and explicitly. We focus on the shift in the composition of public demand towards high-tech goods which, by increasing the market-size of innovative rms, functions as a de-facto innovation policy tool. We build a quality-ladders non-scale growth model with heterogeneous industries and endogenous supply of skills, and show both theoretically and empirically that increases in the technological content of public spending stimulates R&D, raises the wage of skilled workers and, at the same time, stimulates human capital accumulation. A calibrated version of the model suggests that government policy explains up to 32 percent of the observed increase in wage inequality in the period 1978-91.

Suggested Citation

  • Guido Cozzi & Giammario Impullitti, "undated". "Technology Policy and Wage Inequality," Working Papers 2008_23, Business School - Economics, University of Glasgow, revised Oct 2006.
  • Handle: RePEc:gla:glaewp:2008_23
    as

    Download full text from publisher

    File URL: http://www.gla.ac.uk/media/media_89750_en.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
    2. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2002. "General Purpose Technology and Wage Inequality," Journal of Economic Growth, Springer, vol. 7(4), pages 315-345, December.
    3. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
    4. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    5. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 469-497.
    6. Kiley, Michael T, 1999. "The Supply of Skilled Labour and Skill-Biased Technological Progress," Economic Journal, Royal Economic Society, vol. 109(458), pages 708-724, October.
    7. Giovanni L. Violante, 2002. "Technological Acceleration, Skill Transferability, and the Rise in Residual Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 297-338.
    8. 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.
    9. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    10. Philippe Aghion, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Econometrica, Econometric Society, vol. 70(3), pages 855-882, May.
    11. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
    12. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    13. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    14. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    15. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1215-1244.
    16. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
    17. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    18. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
    19. Elias Dinopoulos & Peter Thompson, 1999. "Scale effects in Schumpeterian models of economic growth," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 157-185.
    20. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    21. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    22. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
    23. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
    24. repec:hoo:wpaper:e-93-1 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370 Elsevier.
    2. Giordani Paolo E & Zamparelli Luca, 2008. "The Importance of Industrial Policy in Quality-Ladder Growth Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-30, January.
    3. Giammario Impullitti, 2006. "International Competition, Growth and Optimal R&D Subsidies," 2006 Meeting Papers 739, Society for Economic Dynamics.
    4. repec:pri:cepsud:113krusell is not listed on IDEAS
    5. Cabral, Luís M B & Cozzi, Guido & Denicolò, Vincenzo & Spagnolo, Giancarlo & Zanza, Matteo, 2006. "Procuring Innovation," CEPR Discussion Papers 5774, C.E.P.R. Discussion Papers.
    6. Afonso, Oscar, 2008. "The impact of government intervention on wage inequality without scale effects," Economic Modelling, Elsevier, vol. 25(2), pages 351-362, March.

    More about this item

    Keywords

    R&D-driven growth theory; government procurement; wage inequality; educational choice; technology policy.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    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:gla:glaewp:2008_23. 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: (Tedi Racheva). General contact details of provider: http://edirc.repec.org/data/dpglauk.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.

    If CitEc recognized a reference but did not link an item in RePEc 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 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.