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Dynamic analysis of wage inequality and creative destruction

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  • Keiichi Kishi

    (Graduate School of Economics, Osaka University)

Abstract

This paper investigates the transitional dynamics of a basic Schumpeterian growth model under constant relative risk aversion. In this model, there are three patterns of the evolution of wage inequality: (a) skill-biased technological change, i.e., technological progress leads to a widening of wage inequality; (b) unskill-biased technological change, i.e., technological progress leads to a contraction of wage inequality; and (c) unbiased technological change, i.e., technological progress is independent of wage inequality. By conducting comparative dynamics of an unexpected permanent increase in research productivity in any sector, which we interpret as the arrival of new general purpose technologies, we show that the property of technological change shifts entirely from unskill-biased to skill-biased. The evolution of wage inequality in the model is then consistent with that of the US economy during the period from the 1930s to the 2000s.

Suggested Citation

  • Keiichi Kishi, 2013. "Dynamic analysis of wage inequality and creative destruction," Discussion Papers in Economics and Business 13-20, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1320
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    Cited by:

    1. Óscar Afonso & Ana Maria Bandeira & Manuela Magalhães, 2017. "Effect of the Tax System ON R&D Intensity, Growth, Wages and Consumption Share," Australian Economic Papers, Wiley Blackwell, vol. 56(4), pages 271-291, December.
    2. Keiichi Kishi, 2014. "A patentability requirement and industries targeted by R&D," Discussion Papers in Economics and Business 14-27-Rev., Osaka University, Graduate School of Economics, revised Oct 2014.
    3. Knoblach, Michael, 2019. "Skill-biased technological change, endogenous labor supply, and the skill premium," CEPIE Working Papers 03/19, Technische Universität Dresden, Center of Public and International Economics (CEPIE).

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    More about this item

    Keywords

    Endogenous growth; creative destruction; wage inequality; factor-biased technological change; general purpose technologies.;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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