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The Diffusion of Computers and the Distribution of Wages

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  • Borghans, Lex
  • Weel, Bas ter

    (MERIT)

Abstract

This paper models the impact of the diffusion of computers on the wage structure, startingfrom the observation that computer use increases individual productivity, but also the supplyof goods. This latter effect negatively affects workers producing similar goods. If theproductivity gain is proportional, and the costs of a computer are equal for everyone, workerswith high wages are the first to adopt, leading to within-group wage inequality. Distinguishingskilled and unskilled workers we show that between-group wage inequality falls when the firstskilled workers adopt computers. When unskilled workers start to use computers, between-groupwage inequality increases strongly because of the increased supply of unskilled labor interms of efficiency units. The maximum level of wage inequality depends mainly onparameters regarding the distribution of the productivity of workers within and betweengroups: A large initial level of wage inequality leads to a large short term relative increase inwage inequality. In the long run, when all workers have adopted computers, both within-groupand between-group wage inequality fall to a level depending on differences in productivitygains from using computers. Empirically it is shown that the model is consistent with thepattern of wage inequality in the United States in the period 1963-2000. The current pattern ismainly determined by the short term determinants of wage inequality, making the long runimplications difficult to identify and predict.

Suggested Citation

  • Borghans, Lex & Weel, Bas ter, 2002. "The Diffusion of Computers and the Distribution of Wages," Research Memorandum 039, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:umamer:2002039
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    Cited by:

    1. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    2. Carlos Medina & Christian Posso, 2010. "Technical Change and Polarization of the Labor Market: Evidence for Brazil, Colombia and Mexico," Borradores de Economia 614, Banco de la Republica de Colombia.
    3. Lex Borghans & Bas ter Weel, 2008. "Understanding the Technology of Computer Technology Diffusion: Explaining Computer Adoption Patterns and Implications for the Wage Structure," Journal of Income Distribution, Ad libros publications inc., vol. 17(3-4), pages 37-70, September.
    4. Mareva Sabatier & Bérangère Legendre, 2017. "The puzzle of older workers’ employment: distance to retirement and health effects," International Journal of Manpower, Emerald Group Publishing, vol. 38(1), pages 45-61, April.
    5. Hofer, Helmut & Riedel, Monika, 2003. "Computer Use and the Wage Structure in Austria," Economics Series 147, Institute for Advanced Studies.
    6. Borghans, L. & ter Weel, B.J., 2002. "Do older workers have more trouble using a computer than younger workers?," ROA Research Memorandum 1E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    7. Spitz, Alexandra & Bertschek, Irene, 2003. "IT, Organizational Change and Wages," ZEW Discussion Papers 03-69, ZEW - Leibniz Centre for European Economic Research.
    8. Gould, Eric D., 2005. "Inequality and ability," Labour Economics, Elsevier, vol. 12(2), pages 169-189, April.
    9. Cornelia NOVAC-UDUDEC & Cristina ENACHE & Corina SBUGHEA, 2011. "The IT Impact on the Productivity and the Organizational Performance of Firms in Romania. A model of Empirical Analysis," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 177-183.
    10. Chiara Broccolini & Alessia Lo Turco & Andrea Presbitero & Stefano Staffolani, 2011. "Individual Earnings, International Outsourcing and Technological Change: Evidence from Italy," International Economic Journal, Taylor & Francis Journals, vol. 25(1), pages 29-46.
    11. Lex Borghans & Bas ter Weel, 2008. "Understanding the Technology of Computer Technology Diffusion: Explaining Computer Adoption Patterns and Implications for the Wage Structure," Journal of Income Distribution, Ad libros publications inc., vol. 17(3-4), pages 37-70, September.
    12. Spitz, Alexandra, 2004. "Using Methods of Treatment Evaluation to Estimate the Wage Effect of IT Usage," ZEW Discussion Papers 04-67, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    economics of technology ;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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