Technological Change, Relative Wages, and Unemployment

Author/Editor:

Joshua Aizenman ; Pierre-Richard Agénor

Publication Date:

September 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 94/111

Subject:

English

Publication Date:

September 1, 1994

ISBN/ISSN:

9781451853407/1018-5941

Stock No:

WPIEA1111994

Format:

Paper

Pages:

36

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