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Technology Diffusion and Its Effects on Social Inequalities

  • Magalhaes, Manuela

    ()

    (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica)

  • Hellström, Christian

    (Aalto University)

We develop a dynamic general-equilibrium model in which growth is driven by a skill-biased technology diffusion to reproduce trends in the income inequality, and the labor and skills supplies of the United States between 1969 and 1996. We incorporate education and leisure–labor decisions, and human-capital accumulation. We provide an explanation to why individuals invest in human capital when the investment premium is going down and why the skill-premium is going up when the skills supply is increasing. In addition, our model is the first general-equilibrium model, to our knowledge, that is consistent with a decline of unskilled wages and low growth of productivity in which the effects of a skill-biased technology diffusion on social inequalities are studied. We show that the effects of labor supply decisions on the skill premium cannot be neglected in a diffusion model.

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Paper provided by University of Alicante, D. Quantitative Methods and Economic Theory in its series QM&ET Working Papers with number 12-17.

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Length: 24 pages
Date of creation: 17 Dec 2012
Date of revision:
Handle: RePEc:ris:qmetal:2012_017
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  1. Gottschalk, Peter & Smeeding, Timothy M., 2000. "Empirical evidence on income inequality in industrialized countries," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 5, pages 261-307 Elsevier.
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  7. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  8. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
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  10. Aghion, Philippe, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Scholarly Articles 3350067, Harvard University Department of Economics.
  11. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
  12. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  13. Borjas, George J & Freeman, Richard B & Katz, Lawrence, 1996. "Searching for the Effect of Immigration on the Labor Market," American Economic Review, American Economic Association, vol. 86(2), pages 246-51, May.
  14. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
  15. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
  16. Iván Werning, 2007. "Optimal Fiscal Policy with Redistribution," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 925-967.
  17. Philippe Aghion, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Econometrica, Econometric Society, vol. 70(3), pages 855-882, May.
  18. Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
  19. 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.
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