Technological Change, Relative Wages, and Unemployment

Joshua Aizenman and Pierre-Richard Agénor

No 1994/111, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effect of skill-biased technological change on the structure of wages, the composition of employment and the level of unemployment in a two-sector economy with a heterogenous work force. Efficiency wage considerations and minimum wage legislation lead to labor market segmentation. A technological shock that reduces the demand for unskilled labor and raises the demand for skilled labor in the primary, high-wage sector is shown to increase the relative wage of skilled workers and reduce aggregate employment as well as the employment level of unskilled workers in that sector. The net effect of the shock on the employment level of skilled workers is mitigated by the existence of efficiency factors.

Keywords: WP; primary sector; efficiency wage; unskilled worker; high-ability worker; market-clearing wage; efficiency consideration; primary-sector job; Wages; Employment; Unskilled labor; Labor demand; Skilled labor; relative wage; technological change; full employment equilibrium; working paper of the International Monetary Fund; copyright page (search for similar items in EconPapers)
Pages: 36
Date: 1994-09-01
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Citations: View citations in EconPapers (5)

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Journal Article: Technological change, relative wages, and unemployment (1997)
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