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Technological Change, Relative Wages, and Unemployment

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  • Joshua Aizenman
  • Pierre-Richard Agénor

Abstract

This paper examines the effect of skill-biased technological change on the structure of wages, the composition of employment and the level of unemployment in a two-sector economy with a heterogenous work force. Efficiency wage considerations and minimum wage legislation lead to labor market segmentation. A technological shock that reduces the demand for unskilled labor and raises the demand for skilled labor in the primary, high-wage sector is shown to increase the relative wage of skilled workers and reduce aggregate employment as well as the employment level of unskilled workers in that sector. The net effect of the shock on the employment level of skilled workers is mitigated by the existence of efficiency factors.

Suggested Citation

  • Joshua Aizenman & Pierre-Richard Agénor, 1994. "Technological Change, Relative Wages, and Unemployment," IMF Working Papers 94/111, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:94/111
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, vol. 58(2), pages 277-296, April.
    2. Josef Falkinger & Volker Grossmann, 2003. "Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 523-523, September.
    3. De Palma, Francesco & Seegmuller, Thomas, 2005. "Dual Labor Market And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 9(03), pages 398-411, June.
    4. Josef Falkinger & Volker Grossmann, 2001. "Work Organization, Wage Pressure in the Secondary Labor Market, and the Green Card," CESifo Working Paper Series 485, CESifo Group Munich.
    5. Sneessens, Henri R., 1998. "Technological Bias and Unemployment: A Macroeconomic Perspective," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Aug 1999.
    6. George Chouliarakis & Mónica Correa-López, 2014. "A fair wage model of unemployment with inertia in fairness perceptions," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 88-114, January.
    7. Inoue, Tetsuya, 1998. "Impact of Information Technology and Implications for Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(2), pages 29-60, December.
    8. Pierre-Richard Agenor & Joshua Aizenman, 1996. "Wage Dispersion and Technical Progress," NBER Working Papers 5417, National Bureau of Economic Research, Inc.
    9. Jan Klasinc, 2015. "Ιnvestment in green economy as a potential source of value added," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 8(3), pages 109-118, December.

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