Wage Dispersion and Technical Progress

38 Pages Posted: 11 Jun 2000

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Joshua Aizenman

National Bureau of Economic Research (NBER)

Date Written: January 1996

Abstract

Since the early 1980s, wage dispersion and the ratio of skilled to unskilled employment have increased significantly in several industrial countries. A number of economists have attributed these trends to skill-biased technical progress. This paper studies the wage and employment effects of technological changes of this type. The analysis is based on a model with a heterogeneous work force and a segmented labor market. Skill-biased technical progress is modeled as a shock that switches demand from unskilled to skilled labor in the primary, high-wage sector, while leaving the total demand for labor in that sector constant at initial wages. Such a shock reduces total employment in the primary sector, as the equilibrium increase in skilled labor employment is smaller than the fall in employment of unskilled labor. Efficiency factors are shown to magnify the adverse employment effects of pro-skilled technical change.

Suggested Citation

Agenor, Pierre-Richard and Aizenman, Joshua, Wage Dispersion and Technical Progress (January 1996). NBER Working Paper No. w5417. Available at SSRN: https://ssrn.com/abstract=225477

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Joshua Aizenman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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