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Wage inequality, technology and trade: 21st century evidence

Van Reenen, John (2011) Wage inequality, technology and trade: 21st century evidence. Labour Economics, 18 (6). pp. 730-741. ISSN 0927-5371

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Identification Number: 10.1016/j.labeco.2011.05.006


This paper describes and explains some of the principal trends in the wage and skill distribution in recent decades. Increases in wage inequality started in the US and UK at the end of the 1970s, but are now widespread. A good fraction of this inequality trend is due to technology-related increases in the demand for skilled workers outstripping the growth of their supply. Since the early 1990s, labor markets have become more polarized with jobs in the middle third of the wage distribution shrinking and those in the bottom and top third rising. I argue that this is because computerization complements the most skilled tasks, but substitutes for routine tasks performed by middle wage occupations such as clerks, leaving the demand for the lowest skilled service tasks largely unaffected. Finally, I argue that technology is partly endogenous, for example it has been spurred by trade with China. Thus, trade does matter for changes in the labor market, but through a different mechanism than conventionally thought.

Item Type: Article
Official URL:
Additional Information: © 2011 Elsevier
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
T Technology > T Technology (General)
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 17 Oct 2011 10:34
Last Modified: 12 Jan 2012 15:04

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