Distributional effects of technological regime changes: hysteresis, concentration and inequality dynamics

Abstract

In this paper, we study the effect of different types of technological regime changes on the evolution of industry concentration and wage inequality. Using a calibrated agent-based macroeconomic framework, the Eurace@Unibi model, we consider scenarios where the new regime is characterized by a finite time period of more frequent respectively more substantial changes in the frontier technology compared to the old regime. We show that under both scenarios, the regime change leads to an increase in the heterogeneity of productivity in the firm population and to increased market concentration, where effects are much less pronounced if the new regime differs from the old one with respect to the frequency of innovations. If the new regime is characterized by an increase of the size of the frontier jumps along the technological trajectory, the evolution of the wage inequality has an inverted U-shape with a large fraction of workers profiting in the very long run from high wages offered by dominant high-tech firms. Finally, it is shown that (observable) heterogeneity of worker skills plays an important role in generating these dynamic effects of technological regime changes.

Mind the Knowledge Gap!The Origins of Declining Business Dynamism in a Macroagent-Based Model

“…To the best of our knowledge, no previous work in the ABM field has attempted to jointly explain the stylized facts of declining business dynamism. However, Mellacher (2021) and Dawid and Hepp (2022) have pursued analogous objectives, investigating the impact of distinct technological regimes on growth, market concentration and inequality, albeit by means of different modelling approaches.…”

Technological paradigms, labour creation and destruction in a multi-sector agent-based model

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