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Skill-Biased Technological Change, Organizational Change, and Wage Inequality

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  • Kohei Daido

    () (School of Economics, Kwansei Gakuin University)

  • Ken Tabata

    () (School of Economics, Kwansei Gakuin University)

Abstract

We build a general equilibrium model of monopolistic competition with moral hazard contracting to examine the interactions among skill-biased technological change (SBTC), organizational changes, and skill premium and within-group wage inequality. While the existing literature finds that the increase in the skilled labor ratio induces SBTC and raises the skill premium, we show that SBTC leads to organizational change toward decentralization by delegating authority within firms, which inuences the reward schedule for delegated skilled managers. This organizational change results in the following: (1) the further increase in the skill premium and (2) the rapid expansion of wage inequality among skilled individuals (between skilled workers and skilled managers). Moreover, we find that there are multiple equilibria where the centralized and decentralized organizational modes simultaneously emerge at the intermediate values of the skilled labor ratio.

Suggested Citation

  • Kohei Daido & Ken Tabata, 2012. "Skill-Biased Technological Change, Organizational Change, and Wage Inequality," Discussion Paper Series 84, School of Economics, Kwansei Gakuin University, revised Feb 2012.
  • Handle: RePEc:kgu:wpaper:84
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp84.pdf
    File Function: First version, 2012
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    References listed on IDEAS

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    4. Görlich, Dennis & Snower, Dennis J., 2010. "Wage Inequality and the Changing Organization of Work," Open Access Publications from Kiel Institute for the World Economy 37299, Kiel Institute for the World Economy (IfW).
    5. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Nikolowa, Radoslawa, 2010. "Supply of skilled labour and organizational change," Labour Economics, Elsevier, vol. 17(3), pages 514-522, June.
    7. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 843-881.
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    Cited by:

    1. Zhang, Jingjing, 2013. "Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties," Economic Modelling, Elsevier, vol. 30(C), pages 579-585.

    More about this item

    Keywords

    Decentralization; Moral Hazard; Skill-Biased Technological Change; Skill Premium; Within-Group Wage Inequality;

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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