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Skill-Biased Technological Change and Inequality in the U.S

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  • Ferrreira, Ana Melissa

Abstract

Since the 1980’s, income inequality has increased markedly and is at the highest level ever since it has been recorded in the U.S. This paper uses an overlapping-generations model with incomplete markets that allows for household heterogeneity and that is calibrated to match the U.S. economy with the purpose to study how skill-biased technological change (SBTC) and changes in taxation quantitatively account for the increase in inequality from 1980 to 2010. We find that SBTC and taxation decrease account for 48% of the total increase in the income Gini coefficient. In particular, we conclude that SBTC alone accounted for 42% of the overall increase in income inequality, while changes in the progressivity of the income tax schedule alone accounted for 5,7%.

Suggested Citation

  • Ferrreira, Ana Melissa, 2019. "Skill-Biased Technological Change and Inequality in the U.S," MPRA Paper 93914, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:93914
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    File URL: https://mpra.ub.uni-muenchen.de/93914/1/MPRA_paper_93911.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Technical change; Income Inequality; Wealth Inequality; Heterogeneity; Taxation;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J0 - Labor and Demographic Economics - - General

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