Seminar 237: Macroeconomics, "Unbundling Labor" with Chris Edmond (Zoom)

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Submitted by Brandon Eltiste on August 31, 2020
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Online
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Tuesday, October 27, 2020 - 14:00
About this Event

Simon Mongey, Professor, University of Chicago

Abstract: We use changes in within-occupation wage inequality and skill requirements to understand technological change. We present two new facts. First, in high wage occupations within occupation inequality has increased, while within occupation inequality has decreased in low wage occupation. Second, high wage occupations have become more different in terms of their skill requirements, while low wage occupations have become more similar. We show that extending the model of Rosen (1983) naturally rationalizes this pair of facts. Our model features heterogeneous workers with multiple skills that supply their skills as an indivisible bundle when they choose an occupation. In equilibrium, a given skill can command a premium in occupations that are relatively intensive in its use. If occupations become more similar (different) in their skill requirements, then within-occupation inequality decreases (increases) as the premium paid to the more intensively employed skill increases (decreases). We then extend the model. First, we show how data-consistent changes in skill intensity emerge endogenously when firms choose appropriate technologies given equilibrium skill prices. Second, we use our framework to explain other new facts that we document: relative decreases in low wage occupation hours and experience premia, and increased occupational mobility.