Skill Biased Technological Change and Endogenous Benefits: The Dynamics of Unemployment and Wage Inequality

Abstract: In this paper, we study the effect of skill-biased technological change on unemployment and wage inequality in the presence of a link between social benefits and average income. In this case, an increase in the productivity of skilled workers and hence their wage leads to an increase in average income and hence in benefits. The increased fallback income, in turn, makes unskilled workers ask for higher wages. As higher wages are not justified by respective productivity increases, unemployment rises. More generally, we show that skill-biased technological change leads to increasing unemployment of the unskilled and to a moderately increasing wage inequality when benefits are endogenous. The model provides a theoretical explanation for diverging dynamics in wage inequality and unemployment under different social benefits regimes: Analyzing the social legislation in 14 countries, we find that benefits are linked to the evolution of average income in Continental Europe but not in the U.

Object Details

• Location: Deutsche Nationalbibliothek Frankfurt am Main
• Extent: Online-Ressource
• Language: Englisch
• Notes: Postprint ; begutachtet (peer reviewed) ; In: Applied Economics ; 43 (2009) 7 ; 811-821

Classification and Topics

• Classification: Wirtschaft
• Keyword: Arbeitslosigkeit ; Lohnstruktur ; Technischer Fortschritt ; Qualifikation ; Mehr-Sektoren-Modell ; Faktorsubstitution ; Relativer Preis ; Theorie ; Arbeitsloser ; Arbeitslosigkeit ; Gehaltsstruktur ; Lohnstruktur ; Technischer Fortschritt ; Berufliche Qualifikation ; Qualifikation ; Multisektorales Modell ; Faktorsubstitution ; Relativer Preis

Contributors, Places and Time

• Event: Veröffentlichung
• (where): Mannheim
• (when): 2009
• Creator: Weiss, Matthias ; Garloff, Alfred

Further information

• DOI: 10.1080/00036840802599933
• URN: urn:nbn:de:0168-ssoar-242195
• Rights: Open Access unbekannt; Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
• Last update: 25.03.2025, 1:49 PM CET