Technological changes, wage inequality and skill premiums: Evidence over three centuries

Jari Ojala and Jaakko Pehkonen

No 5, Working Papers from VATT Institute for Economic Research

Abstract: This study analyses the evolution of wages and occupational composition of labour over three centuries, from 1755 to 1914, using worker-workplace data. The data from one industry offers a unique view on long-term trends in skill composition, wage inequality and occupational wage premiums. A major shift in the production technology, a shift from sail-only vessels to steam-operated vessels, in turn, allows the examination the popular skill-biased technological change (SBTC) hypothesis in a well-defined setting. We find that (i) technological change had both a new-skill-demanding aspect, showing up as an increase in the demand for skilled engineers, and a skill-replacing aspect, resulting in a decline in the demand for skilled able-bodied seamen and an increase in unskilled engine room operatives, (ii) increasing wage inequality in the latter part of the 18th century was associated with the emergence of new skilled occupations and rising wages of skilled seamen, and (iii) wage inequality evolved slowly over time and there were different, declining and rising phases in wage inequality.

Keywords: Wage inequality, skill composition, technological change, Labour market, Työmarkkinat, Effectiveness of public services, Julkisten palvelujen vaikuttavuus, J310 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. (industry, schooling, experience, tenure, cohort, etc.), (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-his and nep-lab
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