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Unbundling Labor

Author

Listed:
  • Simon Mongey

    (University of Chicago)

  • Chris Edmond

    (University of Melbourne)

Abstract

In this paper we provide a theory for the role of technological change in the relative substitutability of workers in the economy. We show the theory to be useful for under- standing new trends that we identify in the wages paid to workers. We extend Rosen (1983) to study when the bundled talents of workers that dene their comparative ad- vantage lead them to earn rents, and when these talents may be unbundled such that workers are more substitutable and rents are competed away. Allowing rms to choose their technology as in Caselli and Coleman (2006) endogenizes this substitutability. When technologies are adapted to labor supply, an unbundled economy is more likely, rents to workers shrink, and workers get paid more similarly. We provide empirical evidence consistent with the theory. In the U.S., workers in low skill occupations are paid more similarly now than in the 1980s. Over-time premia, part-time penalties and experience premia have disappeared.

Suggested Citation

  • Simon Mongey & Chris Edmond, 2019. "Unbundling Labor," 2019 Meeting Papers 1263, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1263
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    References listed on IDEAS

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    1. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    2. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    3. Sherwin Rosen, 1983. "A Note on Aggregation of Skills and Labor Quality," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 425-431.
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