TECHNOLOGY, UNEMPLOYMENT, AND RELATIVE WAGES IN A GLOBAL ECONOMY

Donald Davis

No 294369, Harvard Institute for International Development (HIID) Papers from Harvard University, Kennedy School of Government

Abstract: Arguably the most important development in recent decades in US factor markets is the decline in the relative wage of the unskilled. By contrast, in Europe it is undoubtedly the rise and persistence of unemployment. Technology has been identified as a key reason for the rising US wage inequality, while labor market rigidities are often cited as a key reason for European unemployment. This paper seeks to provide a unified account of these major factor market developments. It models the impact of technical change on relative wages and unemployment in a world in which one country has flexible and the other rigid labor market institutions. The results depart significantly but sensibly from what one would expect in a fully flexible wage world. A few stylized facts help to narrow the field to a few candidates to account for these factor market developments.

Keywords: International Development; Labor and Human Capital; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 27
Date: 1996-09
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:hariid:294369

DOI: 10.22004/ag.econ.294369

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