Technical Change, Inequality, and the Labor Market

Acemoğlu, Daron

doi:10.3386/w7800

Cited by 414 publications

(600 citation statements)

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“…A number of important studies have documented factors that have led to fundamental alterations in employment and inequality, including globalization (Alderson and Nielsen 2002), technological change (Acemoglu 2002), financialization Lin and Tomaskovic-Devey 2013), and shareholder pressures (Cobb 2015;Jung 2015). Further, other studies have focused squarely on changes in employment practices, including the decline in ILMs (Cappelli 2001), new wagesetting practices ), the increased use of external hiring (Bidwell 2011), and the rise of nonstandard work arrangements (Ashford, George, and Blatt 2007;Cappelli and Keller 2013).…”

Section: Discussionmentioning

confidence: 99%

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Cobb

Lin

2017

Organization Science

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Wage inequality in the United States has risen dramatically over the past few decades, prompting scholars to develop a number of theoretical accounts for the upward trend. This study argues that large firms have been a prominent labor-market institution that mitigates inequality. By compensating their low-and middle-wage employees with a greater premium than their higher-wage counterparts, large U.S. firms reduced overall wage dispersion. Yet, broader changes to employment relations associated with the demise of internal labor markets and the emergence of alternative employment arrangements have undermined large firms' role as an equalizing institution. Using data from the Current Population Survey and the Survey of Income and Program Participation, we find that in 1989, although all private-sector workers benefited from a firm-size wage premium, the premium was significantly higher for individuals at the lower end and middle of the wage distribution compared to those at the higher end. Between 1989 and 2014, the average firm-size wage premium declined markedly. The decline, however, was exclusive to those at the lower end and middle of the wage distribution, while there was no change for those at the higher end. As such, the uneven declines in the premium across the wage spectrum could account for about 20% of rising wage inequality during this period, suggesting that firms are of great importance to the study of rising inequality.Keywords firm-size wage premium, inequality, internal labor market, employment relationship Disciplines Management Sciences and Quantitative MethodsThis journal article is available at ScholarlyCommons:

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Section: Discussionmentioning

confidence: 99%

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Cobb

Lin

2017

Organization Science

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“…In a well-recognized paper, Blau and Kahn (1996) Þnd no evidence in favor of market forces to reconcile these different wage patterns (under the hypothesis of similar technology-induced changes in the labor demand composition across countries), based on the years of schooling as a measure of skill. However, as pointed out by Acemoglu (2002), the institutional view cannot explain why unemployment rates have risen almost proportionally for educated and less educated workers Bell, 1996, 1997). A recent paper by Leuven et al (2004) is capable to reconcile this conßicting evidence.…”

Section: Resultsmentioning

confidence: 99%

“…1 For a comprehensive survey of the literature on the evolution of the distribution of wages and explanations related to technology changes, see Acemoglu (2002). Other explanations focus on traderelated factors (e.g.…”

Section: Introductionmentioning

confidence: 99%

Non-Routine Tasks, Restructuring of Firms, and Wage Inequality Within and Between Skill-Groups

Egger

Grossmann

2005

J. Econ.

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“…In this process of acceleration (Acemoglu, 2002), the demand for the high skilled created additional demand for high skilled workers, skill obsolescence increased for vocational skills, but not for general ones in Germany (Ludwig and Pfeiffer, 2006). These demand shifts towards analytical skills favoured presumably the high skilled and may be one additional reason for increasing returns to education.…”

Section: Educational Expansion Wages and The Labour Market In West Gmentioning

confidence: 99%

Educational Expansion and Its Heterogeneous Returns for Wage Workers

Gebel¹,

Pfeiffer²

2010

SCHM

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp07010.pdf Non technical summaryThis paper examines the evolution of returns to education in the West German labour market in the period 1984-2004. Graduates from the period of educational expansion in the 1960s and 70s entered the labour market during the period of observation. With a lag, this educational expansion contributed to skill upgrading of the labour force. Our paper tries to contribute empirically to the question, whether this upgrading of schooling "devaluated" its monetary returns in the labour market in the longer run. Based on data from the German Socio-Economic Panel (GSOEP) we estimate returns to education over the past twenty years in West Germany differentiated by socio-economic characteristics to take into account demographic factors and the rise in female labour market participation.A major challenge for empirical research on returns to education is that school choice involves complex decision processes. For instance, students may select themselves into secondary or post secondary education based on unobserved factors like ability, preferences, and parental household income. Students may choose to go to university because of their high skills and abilities. Students from a poor household may leave the educational system earlier because of financial constraints. As a result presumably there will be no single effect of an educational choice on wages but rather a whole distribution of such effects, i.e. returns vary across individuals. In order to tackle these issues we apply two estimation methods. On the one hand, Wooldridge's (2004) approach uses a set of observable control variables. On the other hand, Garen's (1984) control function approach requires an instrumental variable that influences the educational decisions but not the wage outcome.For the population of workers from the GSOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase significantly afterwards. According to the Wooldridge approach, returns to one additional year of education fell from 6.5 percent in 1984 to 4.9 percent in 1998. From 1998 onwards, we find increasing returns to education reaching a new local maximum of 6.4 percent in 2002 which is just below the overall maximum in 1984.Regarding the gender aspects, the average returns to education seem to have been larger for women during the 1980s and early 199...

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Technical Change, Inequality, and the Labor Market

Cited by 414 publications

References 26 publications

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Non-Routine Tasks, Restructuring of Firms, and Wage Inequality Within and Between Skill-Groups

Educational Expansion and Its Heterogeneous Returns for Wage Workers

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