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Reorganization of Firms and Labor Market Inequality

Author

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  • Lindbeck, Assar

    () (Institute for International Economic Studies, Stockholm University)

  • Snower, Dennis J.

    () (Department of Economics Birkbeck College)

Abstract

This paper explores the implications of the ongoing reorganization of firms for inequality in the labour market. We show how recent technological advances in physical and human capital can lead to the breakdown of occupational barriers, creating demands for new combinations of skills, and thereby leading to new patterns of wage inequality. Specifically, our analysis indicates how the changes can segment the labour market into an expanding sector of restructured firms where wages are rising, a contracting sector of traditional firms where wages are relatively stagnant, and an expanding pool of the unemployed. The analysis helps explain various significant labour market phenomena, such as: the increased versatility of work; the widening dispersion of wages within occupational, educational, and job tenure groups in the United Kingdom and the United States, accompanied by a narrowing of the male-female wage differentials; the reorganization of firms from task-oriented departments to customer-oriented teams; and the breakdown of occupational barriers.
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Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J., 1997. "Reorganization of Firms and Labor Market Inequality," Seminar Papers 605, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0605
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1995. "The Economics of Modern Manufacturing: Reply," American Economic Review, American Economic Association, vol. 85(4), pages 997-999, September.
    2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    3. Lindbeck, Assar & Snower, Dennis J., 1995. "Restructuring Production and Work," CEPR Discussion Papers 1323, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Tayloristic organizations; holistic organizations;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General

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