Skill-biased technological change cannot explain cross-national variation in income inequality

Evidence

The dominant explanation in labor economics is capitaland skill-biased technological change. Researchers argue that the spread of information technology since the 1980s disproportionately increased the output of physical capital ðBlanchard 1997; Acemoglu 2003; Kristal 2011Þ and the demand for skilled workers ðAcemoglu 2002; Kaplan and Rauh 2010Þ. The decline of labor’s share, increased earnings inequalities, and the college premium in this account mostly reflect technology-driven changes in marginal productivity. Although intuitive, this theory fails to explain several empirical patterns. First, it does not provide a satisfying answer as to why a comparable concentration of income is not observed in continental Europe or Japan ðPiketty and Saez 2006Þ, where similar technological changes also took place. Second, neither does it explain why there is a larger decline of labor’s share in Europe than in the United States. Third, the skill-biased hypothesis is inconsistent with the growth in demand of labor at the bottom of the skill distribution. Most important, this family of theory does not explain why the growth of wage dispersion slowed down while the development of information technology took off in the late 1990s ðCard and DiNardo 2002Þ. … However, not all workers in the developed countries suffer. Kaplan and Rauh ð2010Þ argue that elite workers are likely to benefit from globalization due to the combination of production and distribution scale and information technology. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 33

Categorization

• XREF: Connects to Piketty and Saez’s comparative institutional findings on top income concentration — the institutional/political explanation for inequality the reader is building toward. — connects to: Deunionization and import competition drive inequality, but computer investment’s inequality effects are uneven. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 170; Job polarization trends stem from political and institutional choices, not technological inevitability — Shoshana Zuboff, The Age of Surveillance Capitalism, 572; The wage premium for digital skills nearly doubled between 2002 and 2016 — Shoshana Zuboff, The Age of Surveillance Capitalism, 2166 (+1 more)
• SEED: The empirical failures of the skill-biased thesis — especially the slowdown of wage dispersion during the late-1990s tech boom — are a strong hook for an essay on why technology alone doesn’t drive inequality.

Related

• Technology-driven explanations cannot explain cross-national inequality patterns. (similarity 0.96)
• Deunionization and import competition drive inequality, but computer investment’s inequality effects are uneven. (similarity 0.87)
• Job polarization trends stem from political and institutional choices, not technological inevitability (similarity 0.82)
• Inequality dimensions reflect one institutional shift toward financialization (similarity 0.78)

Broader Connections

• Deunionization and import competition drive inequality, but computer investment’s inequality effects are uneven. #corroborates (0.82) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 170