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Unraveling wage inequality: tangible and intangible assets, globalization and labor market regulations

Author

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  • Antonio Francesco Gravina

    (University of Palermo)

  • Neil Foster-McGregor

    (Asian Development Bank)

Abstract

In this paper, we study the asymmetric effects of different types of capital-embodied technological change, as proxied by tangible and intangible assets, on relative wages (high- to medium-skilled, high- to low-skilled and medium- to low-skilled workers), relying upon the technology-skill complementarity and polarization of the labor force frameworks. We also consider two additional major channels that contribute to shaping wage differentials: globalization (in terms of trade openness and global value chains participation) and labor market institutions. The empirical analysis is carried out using a panel dataset comprising 17 mostly advanced European economies and 5 industries, with annual observations spanning the period 2008–2017. Our findings suggest that software and databases—as a proxy for intangible technologies—exert downward pressure on low-skilled wages, while robotics is associated with a polarization of the wage distribution at the expense of middle-skilled labor. Additionally, less-skilled workers’ relative wages are negatively affected by trade openness and global value chain participation, but positively influenced by sector-specific labor market regulations.

Suggested Citation

  • Antonio Francesco Gravina & Neil Foster-McGregor, 2024. "Unraveling wage inequality: tangible and intangible assets, globalization and labor market regulations," Empirical Economics, Springer, vol. 67(4), pages 1375-1420, October.
    • Handle: RePEc:spr:empeco:v:67:y:2024:i:4:d:10.1007_s00181-024-02587-y
    DOI: 10.1007/s00181-024-02587-y
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    More about this item

    Keywords

    Robots; Intangibles; Automation; Institutions; Globalization; Wage differentials;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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