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Title: Rising Wage Inequality: Technological Change and Search Frictions

Citation Type: Miscellaneous

Publication Year: 2020

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Abstract: I investigate whether changes to labor market frictions can explain rising wage inequality in the US. I combine the production framework in Krusell et al. (2000), which emphasizes capital skill complementarity as an explanation for rising wage inequality, with the sequential auction search model of Postel-Vinay and Robin (2002). The presence of search frictions, and hence monopsonistic power, provides a range of explanations for rising wage inequality not present in competitive models i.e. changes to job flows, firm heterogeneity or bargaining power. I find that differences in search frictions between skilled and unskilled workers can explain the presence of a positive skill premium but not its growth. Estimates of capitalskill complementarity in Krusell et al. (2000) are therefore robust to including search frictions.

Url: https://davidzentlermunro.github.io/working_papers/KORV_with_frictions.pdf

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Authors: Zentler-Munro, David

Publisher: University College London

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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