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Title: Search Engines vs Steam Engines: Technological Change, Occupation Choice and the Income Distribution

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: This paper considers the implications of two types of technological change for the income distribution in a model in which agents choose to supply either unskilled labor or human capital. Type A technological change allows unskilled labor to produce more output per unit of time, thereby increasing the unskilled wage. Although it has no direct effect on the return to human capital, it increases this return via a general equilibrium effect by an amount that is larger than the rise in the unskilled wage, thereby increasing overall income inequality. Type B technological change expands the scale of operation for workers in certain occupations and is modeled as an increase in the extent to which an occupations production technology displays Increasing Returns to Scale. By enlarging the production capacity of each worker this type of technological progress intensifies competition between workers, driving the least endowed workers out of the occupation and reducing the earnings of the next least endowed workers, thereby raising inequality within the occupation. We compare the theoretical results with U.S. and Chinese data and find support for the predictions.

Url: http://privatewww.essex.ac.uk/~wangt/TechChange_Inequality_Econometrica.pdf

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Authors: Wang, Tianxi; Wright, Greg, C

Publisher: University of California, Merced, University of Essex,

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

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