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Investment-specific Technical Change and the Dynamics of Skill Accumulation and Wage Inequality
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TL;DR: The authors presented a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment-specific technological change, and examined the quantitative effects of some hypothetical tax-policy reforms on skill formation, inequality, and welfare.
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Abstract: Wage inequality between education groups in the United States has increased substantially since the early 1980s. The relative quantity of college-educated workers has also increased dramatically in the postwar period. This paper presents a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment-specific technological change. Working through capital-skill complementarity and endogenous skill accumulation, the model is able to account for much of the observed changes in the relative quantity of skilled workers. The model also does well in replicating the observed rise in wage inequality since the early 1980s. Based on the calibrated model, we examine the quantitative effects of some hypothetical tax-policy reforms on skill formation, inequality, and welfare.
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References
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Technical Change, Inequality, and the Labor Market
TL;DR: The authors argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years and that the recent increase in inequality is most likely due to an acceleration in skill bias.
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Changes in the Wage Structure and Earnings Inequality
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TL;DR: In this article, the authors present a framework for understanding changes in the wage structure and overall earnings inequality, emphasizing the role of supply and demand factors and the interaction of market forces and labor market institutions.
Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality
TL;DR: The authors suggests that the rapid increase in the proportion of college graduates in the United States labor force in 1970s may have been a causal factor in both the decline in the college premium during the 1970s and the large increase in inequality during the 1980s.
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Computing Inequality: Have Computers Changed the Labor Market?
TL;DR: The authors examined the effect of technological change and other factors on the relative demand for workers with different education levels and on the recent growth of U.S. educational wage differentials and found that the increase in demand shifts for more-skilled workers in the 1970s and 1980s relative to the 1960s is entirely accounted for by an increase in within- industry changes in skill utilization rather than between-industry employment shifts.
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Optimal taxation of capital income in general equilibrium with infinite lives
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