THE DOUBLE ROLE OF SKILLED LABOR, NEW TECHNOLOGIES AND WAGE INEQUALITY

Hartmut Egger () and Volker Grossmann ()

Metroeconomica, 2005, vol. 56, issue 1, pages 37-57

Abstract: We examine the relationship between the supply of skilled labor, technological change and relative wages. In accounting for the role of skilled labor in both production activities and productivity- enhancing 'support' activities we derive the following results. First, an increase in the supply of skilled labor raises the employment share of non-production labor within firms, without lowering relative wages. Second, new technologies raise wage inequality only in so far as they give incentives to firms to reallocate skilled labor towards non-production activities. In contrast, skill-biased technological change of the sort usually considered in the literature does not affect wage inequality. Copyright Blackwell Publishing Ltd 2005.

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