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Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment

  • Dunne, Timothy

    ()

    (University of Oklahoma)

  • Foster, Lucia

    ()

    (U.S. Census Bureau)

  • Haltiwanger, John C.

    ()

    (University of Maryland)

  • Troske, Kenneth

    ()

    (University of Kentucky)

By exploiting establishment-level data, this paper sheds new light on the sources of the changes in the structure of production, wages, and employment that have occurred over the last several decades. We investigate the following two related hypotheses. First, that most of the recent increase in the dispersion of wages and productivity has occurred across establishments and these changes are linked. Second, that the increased dispersion in wages and productivity across establishments is linked to differential rates of technological adoption across establishments. Our findings are largely supportive of these hypotheses. Specifically, we find that (1) the between-plant component of wage dispersion is an important and growing part of total wage dispersion; (2) much of the between plant increase in wage dispersion is within industries; (3) the between-plant measures of wage and productivity dispersion have increased substantially over the last few decades; and (4) a significant fraction of the rising dispersion in wages and (to a lesser extent) productivity is accounted for by changes in the distribution of computer investment across plants as well as changes in the wage and productivity differentials associated with the computer investment.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 563.

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Length: 48 pages
Date of creation: Aug 2002
Date of revision:
Publication status: published in: Journal of Labor Economics, 2004, 22 (2), 397-430
Handle: RePEc:iza:izadps:dp563
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  1. Timothy Dunne & Kenneth R Troske & John Haltiwanger, 1996. "Technology and Jobs: Secular Changes and Cyclical Dynamics," Working Papers 96-7, Center for Economic Studies, U.S. Census Bureau.
  2. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
  3. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
  4. Nathalie Greenana & Jacques Mairesse, 2000. "Computers And Productivity In France: Some Evidence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(3), pages 275-315.
  5. Baily, Martin Neil & Bartelsman, Eric J. & Haltiwanger, John, 1995. "Labor productivity: structural change and cyclical dynamics," Serie Research Memoranda 0050, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  6. Catherine J. Morrison, 2000. "Assessing The Productivity Of Information Technology Equipment In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 471-481, August.
  7. Claudia Goldin & Robert A. Margo, 1992. "The Great Compression: The Wage Structure in the United States at Mid-Century," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 1-34.
  8. Timothy Dunne & John Haltiwanger & Lucia Foster, 2000. "Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment," NBER Working Papers 7465, National Bureau of Economic Research, Inc.
  9. Bresnahan, Timothy F, 1999. "Computerisation and Wage Dispersion: An Analytical Reinterpretation," Economic Journal, Royal Economic Society, vol. 109(456), pages F390-415, June.
  10. Berndt, Ernst R. & Morrison, Catherine J., 1995. "High-tech capital formation and economic performance in U.S. manufacturing industries An exploratory analysis," Journal of Econometrics, Elsevier, vol. 65(1), pages 9-43, January.
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  12. Acemoglu, Daron, 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," CEPR Discussion Papers 1459, C.E.P.R. Discussion Papers.
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  16. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau.
  17. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  18. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  19. Kevin J. Stiroh, 2001. "Information technology and the U.S. productivity revival: what do the industry data say?," Staff Reports 115, Federal Reserve Bank of New York.
  20. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
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  22. Frank R. Lichtenberg, 1993. "The Output Contributions of Computer Equipment and Personnel: A Firm- Level Analysis," NBER Working Papers 4540, National Bureau of Economic Research, Inc.
  23. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  24. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  25. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
  26. Erik Brynjolfsson & Shinkyu Yang, 1997. "Information Technology and Productivity: A Review of the Literature," Working Paper Series 202, MIT Center for Coordination Science.
  27. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  28. Brynjolfsson, Erik & Hitt, Lorin M., 2004. "Computing Productivity: Firm-Level Evidence," Working papers 4210-01, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  29. 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.
  30. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  31. Stephen D. Oliner & Daniel E. Sichel, 1994. "Computers and Output Growth Revisited: How Big Is the Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 273-334.
  32. Donald Siegel, 1997. "The Impact Of Computers On Manufacturing Productivity Growth: A Multiple-Indicators, Multiple-Causes Approach," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 68-78, February.
  33. Steven J. Davis & John Haltiwanger, 1995. "Employer Size and The Wage Structure in U.S. Manufacturing," NBER Working Papers 5393, National Bureau of Economic Research, Inc.
  34. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
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