Technological Change, Relative Wages, and Unemployment
September 1, 1994
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Summary
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.
Subject: Employment, Labor, Labor demand, Skilled labor, Unskilled labor, Wages
Keywords: copyright page, efficiency consideration, efficiency wage, Employment, full employment equilibrium, high-ability worker, Labor demand, market-clearing wage, primary sector, primary-sector job, relative wage, Skilled labor, technological change, Unskilled labor, unskilled worker, Wages, working paper of the International Monetary Fund, WP
Pages:
36
Volume:
1994
DOI:
Issue:
111
Series:
Working Paper No. 1994/111
Stock No:
WPIEA1111994
ISBN:
9781451853407
ISSN:
1018-5941
