Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/een/camaaa/2006-01.html
   My bibliography  Save this paper

Inequality And The Dual Economy: Technology Adoption With Specific And General Skills

Author

Listed:
  • Ashley Lester
Abstract
Slow technology diffusion has important consequences for income inequality. Across countries, it can account for much of world inequality. Within countries, the arrival of new technologies often causes popular concern that the wages of some workers will fall. In developing countries, diffusion is often represented in the stylized form of a “dual economy,” in which a gradually increasing fraction of workers use modern technology, while the remainder use traditional technology. This paper generates this pattern of technology adoption endogenously, and shows that it causes the wages of some workers to fall. Diffusion is slow because production requires both skills that are equally useful with any vintage of technology and skills that are imperfectly transferable across vintages. When these skills are sufficiently specific, a dual economy is optimal, even though intermediate technologies are also available. Workers with transferable skills disproportionately join the modern sector, leaving those with specific skills worse off. As in classical trade models, changes in factor supplies affect the allocation of labor across sectors, but not factor rewards. A dynamic extension shows that workers without transferable skills become worse off throughout the period of transition to the modern technology. A further dynamic extension applies the model to developed countries.

Suggested Citation

  • Ashley Lester, 2006. "Inequality And The Dual Economy: Technology Adoption With Specific And General Skills," CAMA Working Papers 2006-01, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2006-01
    as

    Download full text from publisher

    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/1_lester_2006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 35-78.
    2. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    3. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 551-575.
    4. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    5. Broadberry, Stephen & Ghosal, Sayantan, 2002. "From the Counting House to the Modern Office: Explaining Anglo-American Productivity Differences in Services, 1870–1990," The Journal of Economic History, Cambridge University Press, vol. 62(4), pages 967-998, December.
    6. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, vol. 49(1), pages 199-227, April.
    7. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    8. Michael Kremer, 1997. "How Much does Sorting Increase Inequality?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 115-139.
    9. George J. Borjas, 2021. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 9, pages 235-274, World Scientific Publishing Co. Pte. Ltd..
    10. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
    11. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    12. Feinstein, Charles H., 1998. "Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 58(3), pages 625-658, September.
    13. Dirk Krueger & Krishna B. Kumar, 2004. "Skill-Specific rather than General Education: A Reason for US--Europe Growth Differences?," Journal of Economic Growth, Springer, vol. 9(2), pages 167-207, June.
    14. Kremer, Michael & Thomson, James, 1998. "Why Isn't Convergence Instantaneous? Young Workers, Old Workers, and Gradual Adjustment," Journal of Economic Growth, Springer, vol. 3(1), pages 5-28, March.
    15. Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 587-616.
    16. Paul Beaudry & David A. Green, 2005. "Changes in U.S. Wages, 19762000: Ongoing Skill Bias or Major Technological Change?," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 609-648, July.
    17. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    18. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bongers Anelí & Díaz-Roldán Carmen & Torres José L., 2022. "Highly Skilled International Migration, STEM Workers, and Innovation," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 16(1), pages 73-89, January.
    2. Borghans, Lex & ter Weel, Bas, 2007. "The diffusion of computers and the distribution of wages," European Economic Review, Elsevier, vol. 51(3), pages 715-748, April.
    3. Crifo, Patricia, 2008. "Skill supply and biased technical change," Labour Economics, Elsevier, vol. 15(5), pages 812-830, October.
    4. Ottaviano, Gianmarco & Peri, Giovanni, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," CEPR Discussion Papers 6916, C.E.P.R. Discussion Papers.
    5. David Card, 2009. "Immigration and Inequality," American Economic Review, American Economic Association, vol. 99(2), pages 1-21, May.
    6. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    7. Tomas Havranek & Zuzana Irsova & Lubica Laslopova & Olesia Zeynalova, 2020. "Skilled and Unskilled Labor Are Less Substitutable than Commonly Thought," Working Papers IES 2020/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2020.
    8. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    9. Acemoglu, Daron & Gancia, Gino & Zilibotti, Fabrizio, 2012. "Competing engines of growth: Innovation and standardization," Journal of Economic Theory, Elsevier, vol. 147(2), pages 570-601.3.
    10. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-291, April.
    11. Berlingieri, Francesco & Gathmann, Christina & Quinckhardt, Matthias, 2022. "College Openings and Local Economic Development," CEPR Discussion Papers 17374, C.E.P.R. Discussion Papers.
    12. Susana Iranzo & Fabiano Schivardi & Elisa Tosetti, 2008. "Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 247-285, April.
    13. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U. S. Wage Inequality: Re-Assessing the Revisionists," Harvard Institute of Economic Research Working Papers 2095, Harvard - Institute of Economic Research.
    14. Giovanni Peri & Chad Sparber, 2016. "Task Specialization, Immigration, and Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 3, pages 81-115 World Scientific Publishing Co. Pte. Ltd..
    15. Arnaud Dupuy & Todd Sorensen, 2014. "On Input Market Frictions and Estimation of Factors' Demand," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 772-781, January.
    16. Lloyd-Ellis, Huw & Roberts, Joanne, 2002. "Twin Engines of Growth: Skills and Technology as Equal Partners in Balanced Growth," Journal of Economic Growth, Springer, vol. 7(2), pages 87-115, June.
    17. Huw Lloyd-Ellis & Joanne Roberts, 2000. "Twin Engines of Growth," Cahiers de recherche CREFE / CREFE Working Papers 118, CREFE, Université du Québec à Montréal.
    18. Einiö, Elias, 2015. "The Loss of Production Work: Identification of Demand Shifts Based on Local Soviet Trade Shocks," Working Papers 61, VATT Institute for Economic Research.
    19. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    20. Mbassi, Christophe Martial & Messono, Omang Ombolo, 2023. "Historical technology and current economic development: Reassessing the nature of the relationship," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2006-01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cama Admin (email available below). General contact details of provider: https://edirc.repec.org/data/asanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.