Skill-Biased Technological Change, Organizational Change, and Wage Inequality

Kohei Daido and Ken Tabata

No 84, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We build a general equilibrium model of monopolistic competition with moral hazard contracting to examine the interactions among skill-biased technological change (SBTC), organizational changes, and skill premium and within-group wage inequality. While the existing literature finds that the increase in the skilled labor ratio induces SBTC and raises the skill premium, we show that SBTC leads to organizational change toward decentralization by delegating authority within firms, which inuences the reward schedule for delegated skilled managers. This organizational change results in the following: (1) the further increase in the skill premium and (2) the rapid expansion of wage inequality among skilled individuals (between skilled workers and skilled managers). Moreover, we find that there are multiple equilibria where the centralized and decentralized organizational modes simultaneously emerge at the intermediate values of the skilled labor ratio.

Keywords: Decentralization; Moral Hazard; Skill-Biased Technological Change; Skill Premium; Within-Group Wage Inequality (search for similar items in EconPapers)
JEL-codes: D86 J31 L16 L22 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-02, Revised 2012-02
New Economics Papers: this item is included in nep-bec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:84

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