IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp11519.html
   My bibliography  Save this paper

Employer Power, Labor Saving Technical Change, and Inequality

Author

Listed:
  • Chau, Nancy H.

    () (Cornell University)

  • Kanbur, Ravi

    () (Cornell University)

Abstract

How does employer power mediate the impact of labor saving technical change on inequality? This question has largely been neglected in the recent literature on the wage and distributional consequences of automation, where the labor market is assumed to be competitive. In a simple task-based model, with search frictions which generate an equilibrium wage distribution even with identical firms and workers, we explore the implications of labor saving technical change for equilibrium outcomes. We show that employer power is a crucial determinant of the nuanced comparative statics of technical change. Among a range of results, we show the possibility of Kuznetsian inverse-U relationships between employer power and inequality, and labor saving technical change and inequality. We further show that when employer power is sufficiently low, labor saving technical change can both increase total output and increase wage inequality. With free entry of firms, labor saving technical change leads to both a first order dominating shift in the age distribution and an increase in the Gini coefficient of wage inequality.

Suggested Citation

  • Chau, Nancy H. & Kanbur, Ravi, 2018. "Employer Power, Labor Saving Technical Change, and Inequality," IZA Discussion Papers 11519, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11519
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp11519.pdf
    Download Restriction: no

    More about this item

    Keywords

    employer power; labor saving technical change; wage inequality; search model; equilibrium wage distribution;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    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:iza:izadps:dp11519. 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: (Mark Fallak). General contact details of provider: http://www.iza.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.