TY - JOUR AU - Assaf Sarid, AU - Maoz, Yishay D. PY - 2021/11/05 Y2 - 2024/03/28 TI - Sectoral Heterogeneity, Income Inequality and Productivity Dynamics JF - Journal of Income Distribution® JA - JID VL - IS - SE - Articles DO - 10.25071/1874-6322.40462 UR - https://jid.journals.yorku.ca/index.php/jid/article/view/40462 SP - AB - <p>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.</p> ER -