Big Data and Inequality

Carl-Christian Groh ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: This paper studies the distributional consequences of the increasing importance of (big) data in modern economies. I consider a simple theoretical model in which firms produce output using capital and labor. Firms can hire labor on the spot market, but must choose their capital stock for a given period in advance and under uncertainty regarding their future profitability. Access to data resolves this uncertainty, thereby primarily increasing the aggregate demand for and the remuneration of capital. Furthermore, the increased demand for capital crowds out labor demand by reducing the price of the output goods, which reduces aggregate labor income. By an analogous logic, the rising availability of data can also increase the skill premium, given that firms can adjust their unskilled labor input more easily than their skilled labor input.

Keywords: inequality; big data; uncertainty; wages (search for similar items in EconPapers)
JEL-codes: D21 D81 E24 J24 (search for similar items in EconPapers)
Pages: 48
Date: 2024-06
New Economics Papers: this item is included in nep-lma
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