Sectoral Heterogeneity, Income Inequality and Productivity Dynamics

Authors

DOI:

https://doi.org/10.25071/1874-6322.40462

Keywords:

Income Distribution, Economic Growth, Factor Productivity

Abstract

An intricate dynamic pattern has been commonly observed in many developed countries during the past decades. This pattern contains a simultaneous rise in the following economic variables: (i) total factor productivity, (ii) educated labor supply, (iii) wage-gap between high- and low-skilled workers, and (iv) income inequality. Typical explanations for the different elements of this pattern assume a skill-biased technical change (SBTC) or capital-skill complementarity. In this study we offer a complementing explanation for these phenomena, which is based on sectoral heterogeneity and endogenous factor mobility, rather than on an SBTC. We show that sectoral heterogeneity can amplify the effects of a technical change, whether skill-biased or general, in a manner that generates the four elements of the above described dynamic pattern. Furthermore, inequality can perform also a Kuznets-curve pattern, as was observed in several countries, in contrast to the inequality dynamics in typical SBTC models.

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Published

2021-11-05

How to Cite

Assaf Sarid, & Maoz, Y. D. . (2021). Sectoral Heterogeneity, Income Inequality and Productivity Dynamics. Journal of Income Distribution®, 1. https://doi.org/10.25071/1874-6322.40462

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