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Power-Biased Technological Change and the Rise in Earnings Inequality

  • Peter Skott

    ()

    (University of Massachusetts Amherst)

  • Frederick Guy

    ()

    (Birkbeck College)

New information and communication technologies, we argue, have been 'power-biased': they have allowed firms to monitor low-skill workers more closely, thus reducing the power of these workers. An efficiency wage model shows that 'power-biased technical change' in this sense may generate rising wage inequality accompanied by an increase in both the effort and unemployment of low-skill workers. The skill-biased technological change hypothesis, on the other hand, offers no explanation for the observed increase in effort. JEL Categories: J31, O33

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2005-17.

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Date of creation: Oct 2005
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Handle: RePEc:ums:papers:2005-17
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