Innovation and Inequality: How Does Technical Progress Affect Workers?

by Gilles Saint-Paul

Overview

Karl Marx predicted a world in which technical innovation would increasingly devalue and impoverish workers, but other economists thought the opposite, that it would lead to increased wages and living standards--and the economists were right. Yet in the last three decades, the market economy has been jeopardized by a worrying phenomenon: a rise in wage inequality that has left a substantial portion of the workforce worse off despite the continuing productivity growth enjoyed by the economy. Innovation and Inequality examines why.

Studies have firmly established a link between this worrying trend and technical change, in particular the rise of new information technologies. In Innovation and Inequality, Gilles Saint-Paul provides a synthetic theoretical analysis of the most important mechanisms by which technical progress and innovation affect the distribution of income. He discusses the conditions under which skill-biased technical change may reduce the wages of the least skilled, and how improvements in information technology allow "superstars" to increase the scale of their activity at the expense of less talented workers. He shows how the structure of demand changes as the economy becomes wealthier, in ways that may potentially harm the poorest segments of the workforce and economy. An essential text for graduate students and an indispensable resource for researchers, Innovation and Inequality reveals how different categories of workers gain or lose from innovation, and how that gain or loss crucially depends on the nature of the innovation.

Product Details

ISBN-13:	9781400824779
Publisher:	Princeton University Press
Publication date:	07/01/2008
Series:	New Forum Books Series
Sold by:	Barnes & Noble
Format:	eBook
Pages:	208
File size:	2 MB

About the Author

Gilles Saint-Paul is professor of economics at the Toulouse School of Economics and at the University of London's Birkbeck College. His books include The Political Economy of Labour Market Institutions and Dual Labor Markets.

Table of Contents

Introduction vii


Chapter 1: Which Tools Do We Need? 1
1.1 Production and Factor Prices 2
1.2 Factor Prices and Income Distribution 6
1.3 Factor Accumulation 11
1.4 Endogenous Technical Change 15


Chapter 2: Productivity and Wages in Neoclassical Growth Models 23
2.1 The Short Run 25
2.2 The Long Run 26
2.3 Conclusion 31


Chapter 3: Heterogeneous Labor 32
3.1 Skill-Biased Technical Progress 32
3.2 Capital-Skill Complementarity 35
3.3 Unbalanced Growth 38
3.4 Conclusion 41


Chapter 4: Competing Technologies 42
4.1 Learning the New Technology Is Costly 43
4.2 The New Technology Has Different Factor Intensities 52
4.3 Asymmetric Technical Progress 54
4.4 Conclusion 56


Chapter 5: Supply Effects 57
5.1 Supply Effects and Competing Technologies 58
5.2 Induced Bias in Innovation 72
5.3 Conclusion 84


Chapter 6: Labor as a Quality Input: Skill Aggregation and Sectoral Segregation 85
6.1 Bundling and Pricing of Labor Market Characteristics 86
6.2 Conclusion 98


Chapter 7: The Economics of Superstars 99
7.1 A Simple Model 100
7.2 Occupational Choice and Displacement 103
7.3 Growth and the Allocation of Talent 108
7.4 Hierarchy and Span of Control 109
7.5 Conclusion 116


Chapter 8: Complementarities and Segregation by Skills 117
8.1 A Simple Model 117
8.2 Application: Household Income Inequality and Assortative Mating 125
8.3 Extension: Increasing Firm Size and the Number of Worker Types in Segregated Equilibria 127
8.4 Aggregating Individual Interactions 131
8.5 Conclusion 148
8.6 Appendix 148


Chapter 9: Demand Effects 152
9.1 The Isoelastic Benchmark 153
9.2 Nonhomothetic Utility 154
9.3 The Limited Needs Property 155
9.4 Dynamics: Growth and the Introduction of New Varieties 158
9.5 An Application to Globalization 163
9.6 Asymmetries between Goods 165
9.7 Conclusion 171
9.8 Appendix 172


Chapter 10: Nonhomothetic Preferences and the Distributive Effects of Innovation and Intellectual Property 174
10.1 The Social Welfare Problem 175
10.2 Second-Best Analysis: The Role of Intellectual Property 179
10.3 Conclusion 182
10.4 Appendix: Derivation of (10.11) 183


Epilogue 184
References 187

What People are Saying About This

Giuseppe Bertola

A well-crafted book offering a rigorous analysis of topical issues from a variety of original perspectives.
(Giuseppe Bertola, University of Turin)

Giuseppe Bertola

A well-crafted book offering a rigorous analysis of topical issues from a variety of original perspectives.
— Giuseppe Bertola, University of Turin

Daron Acemoglu

The increase in earnings inequality in many countries over the past twenty-five years has been a major topic of academic study and policy debate, and many economists believe that technological developments have played a large role in this development. This book goes much further than existing studies and develops the various links between innovation and inequality. Gilles Saint-Paul covers most of the available approaches masterfully but is not afraid to push for a coherent view based on his own research. This book not only breaks new ground but also achieves a nice synthesis of much recent work in economics. This is a must-read for any graduate student or researcher interested in innovation or recent changes in the labor market.
— Daron Acemoglu, Massachusetts Institute of Technology

Ulrike Niens

The increase in earnings inequality in many countries over the past twenty-five years has been a major topic of academic study and policy debate, and many economists believe that technological developments have played a large role in this development. This book goes much further than existing studies and develops the various links between innovation and inequality. Gilles Saint-Paul covers most of the available approaches masterfully but is not afraid to push for a coherent view based on his own research. This book not only breaks new ground but also achieves a nice synthesis of much recent work in economics. This is a must-read for any graduate student or researcher interested in innovation or recent changes in the labor market.
(Daron Acemoglu, Massachusetts Institute of Technology)

David Autor

An exceptionally interesting, well-exposited, and timely volume.
(David Autor, Massachusetts Institute of Technology)

Editorial Reviews

"This book is a must read for anyone with an interest in what Tinbergen once termed 'the race between education and technology'. . . . Gilles Saint-Paul has written a book that takes stock of a debate that, for now, has more or less petered out in the literature. But he does so in a comprehensive and concise way, and, as his focus is theoretical, the book collects the most relevant and interesting models that were brought to bear on the issue. It is a timely and timeless book on an issue that is sure to resurface—and when it does, this is an excellent book to have in your collection."—Mark Sanders, British Journal of Industrial Relations

From the Publisher

This book is a must read for anyone with an interest in what Tinbergen once termed 'the race between education and technology'. . . . Gilles Saint-Paul has written a book that takes stock of a debate that, for now, has more or less petered out in the literature. But he does so in a comprehensive and concise way, and, as his focus is theoretical, the book collects the most relevant and interesting models that were brought to bear on the issue. It is a timely and timeless book on an issue that is sure to resurface—and when it does, this is an excellent book to have in your collection.

British Journal of Industrial Relations - Mark Sanders

This book is a must read for anyone with an interest in what Tinbergen once termed 'the race between education and technology'. . . . Gilles Saint-Paul has written a book that takes stock of a debate that, for now, has more or less petered out in the literature. But he does so in a comprehensive and concise way, and, as his focus is theoretical, the book collects the most relevant and interesting models that were brought to bear on the issue. It is a timely and timeless book on an issue that is sure to resurface—and when it does, this is an excellent book to have in your collection.
— Mark Sanders

British Journal of Industrial Relations