Technological Change, Relative Wages, and Unemployment

36 Pages Posted: 15 Feb 2006

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Date Written: September 1994

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.

JEL Classification: E24, J31, J42

Suggested Citation

Agenor, Pierre-Richard, Technological Change, Relative Wages, and Unemployment (September 1994). IMF Working Paper, Vol. , pp. 1-36, 1994. Available at SSRN: https://ssrn.com/abstract=883853

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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