IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/20855.html
   My bibliography  Save this paper

Accounting for Changes in Between-Group Inequality

Author

Listed:
  • Ariel Burstein
  • Eduardo Morales
  • Jonathan Vogel

Abstract

We perform a quantitative analysis of observed changes in U.S. between-group inequality between 1984 and 2003. We use an assignment framework with many labor groups, equipment types, and occupations in which changes in inequality are caused by changes in workforce composition, occupation demand, computerization, and labor productivity. We parameterize our model using direct measures of computer usage within labor group-occupation pairs and quantify the impact of each shock for various measures of between-group inequality. We find, for instance, that the combination of computerization and shifts in occupation demand account for roughly 80% of the rise in the skill premium, with computerization alone accounting for roughly 60%. We show theoretically how computerization and changes in occupation demand may be caused by international trade and quantify the impact of trade in computers on U.S. inequality.

Suggested Citation

  • Ariel Burstein & Eduardo Morales & Jonathan Vogel, 2015. "Accounting for Changes in Between-Group Inequality," NBER Working Papers 20855, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20855
    Note: EFG ITI LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w20855.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. David Card & Alan B. Krueger, 1992. "School Quality and Black-White Relative Earnings: A Direct Assessment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 151-200.
    3. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    4. Claudia Goldin & Lawrence F. Katz, 2002. "The Power of the Pill: Oral Contraceptives and Women's Career and Marriage Decisions," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 730-770, August.
    5. Ezra Oberfield & Devesh Raval, 2021. "Micro Data and Macro Technology," Econometrica, Econometric Society, vol. 89(2), pages 703-732, March.
    6. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    7. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    8. Arnaud Costinot & Jonathan Vogel, 2010. "Matching and Inequality in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 747-786, August.
    9. Alan B. Krueger, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984–1989," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 33-60.
    10. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    11. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    12. Stokey, Nancy L, 1996. "Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-447, December.
    13. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 357-405.
    14. John E. DiNardo & Jörn-Steffen Pischke, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 291-303.
    15. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 205-229.
    16. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 731-759.
    17. Lee, Donghoon & Wolpin, Kenneth I., 2010. "Accounting for wage and employment changes in the US from 1968-2000: A dynamic model of labor market equilibrium," Journal of Econometrics, Elsevier, vol. 156(1), pages 68-85, May.
    18. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    19. Ariel Burstein & Jonathan Vogel, 2017. "International Trade, Technology, and the Skill Premium," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1356-1412.
    20. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    21. Fernando Parro, 2013. "Capital-Skill Complementarity and the Skill Premium in a Quantitative Model of Trade," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 72-117, April.
    22. Brian K. Kovak, 2013. "Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?," American Economic Review, American Economic Association, vol. 103(5), pages 1960-1976, August.
    23. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    24. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    25. Paula Bustos, 2005. "The impact of trade liberalization on skill upgrading. Evidence from Argentina," Economics Working Papers 1189, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
    26. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
    27. repec:oup:restud:v:84:y::i:1:p:357-405. is not listed on IDEAS
    28. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    29. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
    30. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1383-1435.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joseph S. Shapiro & Reed Walker, 2018. "Why Is Pollution from US Manufacturing Declining? The Roles of Environmental Regulation, Productivity, and Trade," American Economic Review, American Economic Association, vol. 108(12), pages 3814-3854, December.
    2. David Hémous & Morten Olsen, 2022. "The Rise of the Machines: Automation, Horizontal Innovation, and Income Inequality," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 179-223, January.
    3. Liu, Chen & Ma, Xiao, 2018. "China's Export Surge and the New Margins of Trade," MPRA Paper 103970, University Library of Munich, Germany, revised Oct 2020.
    4. Pablo D. Fajgelbaum & Amit K. Khandelwal, 2016. "Measuring the Unequal Gains from Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1113-1180.
    5. Ezra Oberfield & Devesh Raval, 2021. "Micro Data and Macro Technology," Econometrica, Econometric Society, vol. 89(2), pages 703-732, March.
    6. Tang, Rongsheng & Wang, Gaowang, 2021. "Educational mismatch and income inequality," Economic Modelling, Elsevier, vol. 100(C).
    7. repec:cte:werepe:23566 is not listed on IDEAS
    8. Christian vom Lehn, 2015. "Labor Market Polarization, the Decline of Routine Work, and Technological Change: A Quantitative Evaluation," 2015 Meeting Papers 151, Society for Economic Dynamics.
    9. Lee, Eunhee & Yi, Kei-Mu, 2018. "Global value chains and inequality with endogenous labor supply," Journal of International Economics, Elsevier, vol. 115(C), pages 223-241.
    10. Youngmin Park & Youngki Shin & Lance Lochner, 2017. "Earnings Dynamics and Returns to Skills," 2017 Meeting Papers 166, Society for Economic Dynamics.
    11. Atalay, Enghin & Phongthiengtham, Phai & Sotelo, Sebastian & Tannenbaum, Daniel, 2018. "New technologies and the labor market," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 48-67.
    12. Shapiro, Joseph S. & Walker, Reed, 2015. "Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences," IZA Discussion Papers 8789, Institute of Labor Economics (IZA).
    13. He, Zheli, 2018. "Trade and Real Wages of the Rich and Poor: Cross-Region Evidence," SocArXiv bme6k, Center for Open Science.
    14. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    15. Lee, Tim & Shin, Yongseok, 2017. "Horizonatal and Vertical Polarization: Task-Specific Technological Change in a Multi-Sector Economy," TSE Working Papers 17-800, Toulouse School of Economics (TSE).
    16. Tang, Rongsheng & Wang, Gaowang, 2021. "Educational mismatch and earnings inequality," MPRA Paper 106953, University Library of Munich, Germany.
    17. Li, Bingjing, 2018. "Export expansion, skill acquisition and industry specialization: evidence from china," Journal of International Economics, Elsevier, vol. 114(C), pages 346-361.
    18. Bolhuis, Marijn, 2019. "Catch-Up Growth and Inter-Industry Productivity Spillovers," MPRA Paper 94730, University Library of Munich, Germany.
    19. Yongseok Shin & Tim Lee, 2016. "Managing a Polarized Structural Change," 2016 Meeting Papers 1464, Society for Economic Dynamics.
    20. Chihiro Inaba, 2019. "Multi-dimensional skills and matching: implications for international trade and wage inequality," Review of Economics and Institutions, Università di Perugia, vol. 10(2).
    21. Archawa Paweenawat & Robert Townsend, 2019. "The Impact of Regional Isolationism: Disentangling Real and Financial Factors," PIER Discussion Papers 109, Puey Ungphakorn Institute for Economic Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    3. Monte, Ferdinando, 2011. "Skill bias, trade, and wage dispersion," Journal of International Economics, Elsevier, vol. 83(2), pages 202-218, March.
    4. Raveh, Ohad & Reshef, Ariell, 2016. "Capital imports composition, complementarities, and the skill premium in developing countries," Journal of Development Economics, Elsevier, vol. 118(C), pages 183-206.
    5. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    6. Lee, Eunhee, 2020. "Trade, inequality, and the endogenous sorting ofheterogeneous workers," Journal of International Economics, Elsevier, vol. 125(C).
    7. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 357-405.
    8. Nicola Gagliardi & Benoît Mahy & François Rycx, 2020. "Trade, GVCs, and wage inequality: Theoretical and empirical insights," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 115-134.
    9. Kasahara, Hiroyuki & Liang, Yawen & Rodrigue, Joel, 2016. "Does importing intermediates increase the demand for skilled workers? Plant-level evidence from Indonesia," Journal of International Economics, Elsevier, vol. 102(C), pages 242-261.
    10. James Harrigan & Ariell Reshef, 2015. "Skill‐biased heterogeneous firms, trade liberalization and the skill premium," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(3), pages 1024-1066, August.
    11. Stephen Machin & John Van Reenen, 2007. "Changes in Wage Inequality," CEP Reports 18, Centre for Economic Performance, LSE.
    12. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    13. Koren, Miklós & Csillag, Márton, 2011. "Machines and machinists: Capital-skill complementarity from an international trade perspective," CEPR Discussion Papers 8317, C.E.P.R. Discussion Papers.
    14. Gries, T. & Grundmann, R. & Palnau, I. & Redlin, M., 2015. "Does technological change drive inclusive industrialization? : A review of major concepts and findings," MERIT Working Papers 2015-044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    15. David J. Deming, 2017. "The Growing Importance of Social Skills in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1593-1640.
    16. Olarreaga, Marcelo & Cruz, Marcio & Milet, Emmanuel, 2017. "Online Exports and the Wage Gap," CEPR Discussion Papers 12092, C.E.P.R. Discussion Papers.
    17. Borusyak, Kirill & Jaravel, Xavier, 2024. "Are trade wars class wars? The importance of trade-induced horizontal inequality," Journal of International Economics, Elsevier, vol. 150(C).
    18. Nico Voigtlaender, 2009. "Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology," 2009 Meeting Papers 1136, Society for Economic Dynamics.
    19. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    20. Francine D. Blau & Lawrence M. Kahn, 2006. "The U.S. Gender Pay Gap in the 1990S: Slowing Convergence," ILR Review, Cornell University, ILR School, vol. 60(1), pages 45-66, October.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:20855. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.