The Effects of Technical Change on Labor Market Inequalities

In this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labor market. A key focus is on the rise of U.S. wage inequality over the past 30 years. However, we also pay attention to how Europe did not experience changes in wage inequality but instead saw a sharp increase in unemployment and an increased labor share of income, variables that remained stable in the U.S. We hypothesize that these changes in labor market inequalities can be be accounted for by the wave of capitalembodied technological change, which we also document. We propose a variety of mechanisms based on how technology increases the returns to education, ability, experience, and “luck” in the labor market. We also discuss how the wage distribution may have been indirectly influenced by technical change through changes in certain aspects of the organization of work, such as the hierarchical structure of firms, the extent of unionization, and the degree of centralization of bargaining. To account for the U.S.-Europe differences, we use a theory based on institutional differences between the United States and Europe, along with a common acceleration of technical change. Finally, we briefly comment on the implications of labor market inequalities for welfare and for economic policy.Inequality, Institutions, Labor Market, Skills, Technological Change

Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism

Unemployment ; Labor market

Frictional Wage Dispersion in Search Models: A Quantitative Assessment

We propose a new measure of frictional wage dispersion: the mean-min wage ratio. For a large class of search models, we show that this measure is independent of the wage-offer distribution but depends on statistics of labor-market turnover and on preferences. Under plausible preference parameterizations, observed magnitudes for worker flows imply that in the basic search model, and in most of its extensions, frictional wage dispersion is very small. Notable exceptions are some of the most recent models of on-the-job search. Our new measure allows us to rationalize the diverse empirical findings in the large literature estimating structural search models. (JEL D81, D83, J31, J41, J64)

Capital-skill complementarity and inequality: a macroeconomic analysis

The notion of skilled-biased technological change is often held responsible for the recent behavior of the U.S. skill premium, or the ratio between the wages of skilled and unskilled labor. This paper develops a framework for understanding this notion in terms of observable variables and uses the framework to evaluate the fraction of the skill premium's variation that is caused by changes in observables. A version of the neoclassical growth model is used in which the key feature of aggregate technology is capital-skill complementarity: the elasticity of substitution is higher between capital equipment and unskilled labor than between capital equipment and skilled labor. With this feature, changes in observables can account for nearly all the variation in the skill premium over the last 30 years. This finding suggests that increased wage inequality results from economic growth driven by new, efficient technologies embodied in capital equipment.Income distribution ; Education ; Wages

Partial complementation of Sinorhizobium meliloti bacA mutant phenotypes by the Mycobacterium tuberculosis BacA protein

The Sinorhizobium meliloti BacA ABC transporter protein plays an important role in its nodulating symbiosis with the legume alfalfa (Medicago sativa). The Mycobacterium tuberculosis BacA homolog was found to be important for the maintenance of chronic murine infections, yet its in vivo function is unknown. In the legume plant as well as in the mammalian host, bacteria encounter host antimicrobial peptides (AMPs). We found that the M. tuberculosis BacA protein was able to partially complement the symbiotic defect of an S. meliloti BacA-deficient mutant on alfalfa plants and to protect this mutant in vitro from the antimicrobial activity of a synthetic legume peptide, NCR247, and a recombinant human \u3b2-defensin 2 (HBD2). This finding was also confirmed using an M. tuberculosis insertion mutant. Furthermore, M. tuberculosis BacA-mediated protection of the legume symbiont S. meliloti against legume defensins as well as HBD2 is dependent on its attached ATPase domain. In addition, we show that M. tuberculosis BacA mediates peptide uptake of the truncated bovine AMP, Bac71-16. This process required a functional ATPase domain. We therefore suggest that M. tuberculosis BacA is important for the transport of peptides across the cytoplasmic membrane and is part of a complete ABC transporter. Hence, BacA-mediated protection against host AMPs might be important for the maintenance of latent infections

The Farm, the city, and the emergence of social security

We study the social, demographic and economic origins of social security. The data for the U.S. and for a cross section of countries suggest that urbanization and industrialization are associated with the rise of social insurance. We describe an OLG model in which demographics, technology, and social security are linked together in a political economy equilibrium. In the model economy, there are two locations (sectors), the farm (agricultural) and the city (industrial) and the decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Farmers rely on land inheritance for their old age and do not support a pay-as-you-go social security system. With structural change, people migrate to the city, the land loses its importance and support for social security arises. We show that a calibrated version of this economy, where social security taxes are determined by majority voting, is consistent with the historical transformation in the United States