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The Diffusion of Computers and the Distribution of Wages

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  • Borghans,Lex
  • Weel,Bas,ter

    (ROA rm)

Abstract

This paper models the impact of the diffusion of computers on the wage structure, starting from the observation that computer use increases individual productivity, but also the supply of goods. This latter effect negatively affects workers producing similar goods. If the productivity gain is proportional, and the costs of a computer are equal for everyone, workers with high wages are the first to adopt, leading to within-group wage inequality. Distinguishing skilled and unskilled workers we show that between-group wage inequality falls when the first skilled workers adopt computers. When unskilled workers start to use computers, between group wage inequality increases strongly because of the increased supply of unskilled labor in terms of efficiency units. The maximum level of wage inequality depends mainly on parameters regarding the distribution of the productivity of workers within and between groups: A large initial level of wage inequality leads to a large short term relative increase in wage inequality. In the long run, when all workers have adopted computers, both within-group and between-group wage inequality fall to a level depending on differences in productivity gains from using computers. Empirically it is shown that the model is consistent with the pattern of wage inequality in the United States in the period 1963-2000. The current pattern is mainly determined by the short term determinants of wage inequality, making the long run implications difficult to identify and predict.Keywords: Wage Inequality; Wage Level and Structure; ComputerizationJEL Codes: J31, O30

Suggested Citation

  • Borghans,Lex & Weel,Bas,ter, 2003. "The Diffusion of Computers and the Distribution of Wages," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  • Handle: RePEc:unm:umaror:2003003
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    Cited by:

    1. 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, Journal of Income Distribution, vol. 17(3-4), pages 37-70, September.
    2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1279-1333.
    3. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370 Elsevier.
    4. Spitz, Alexandra & Bertschek, Irene, 2003. "IT, Organizational Change and Wages," ZEW Discussion Papers 03-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Sabrina Wulff Pabilonia & Cindy Zoghi, 2004. "Which Workers Gain from Computer Use?," Working Papers 373, U.S. Bureau of Labor Statistics.
    6. Gould, Eric D., 2005. "Inequality and ability," Labour Economics, Elsevier, vol. 12(2), pages 169-189, April.
    7. 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.
    8. 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.
    9. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    10. Spitz, Alexandra, 2004. "Using Methods of Treatment Evaluation to Estimate the Wage Effect of IT Usage," ZEW Discussion Papers 04-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    education; training and the labour market;

    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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