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Capital Intensity, Neutral Technological Change, and Earnings Inequality

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  • Michael Sattinger

Abstract

The paper furthers the neoclassical theory of earnings inequality. The inequality multiplier is derived as the amount by which inequality in skills must be multiplied to yield earnings inequality. Neutral technological change and the real interest rate affect inequality by changing capital per worker. The effect of capital per worker on the inequality multiplier is related to skill differentials and capital-skill complementarity. The results explain increasing inequality from the mid 1970's into the 1990's.

Suggested Citation

  • Michael Sattinger, 2003. "Capital Intensity, Neutral Technological Change, and Earnings Inequality," Discussion Papers 03-05, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:03-05
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    File URL: http://www.albany.edu/~ms339/CapitalIntensity.pdf
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