TY - JOUR
T1 - A directed search model of inequality with heterogeneous skills and skill-biased technology
AU - Shi, Shouyong
N1 - Funding Information:
Acknowledgements. An earlier version of this paper has been circulated under the title "Unskilled workers in an economy with skill-biased technology". Two referees and a managing editor provided thorough comments that led to significant improvements of the paper. I have also benefited from comments by Dan Bernhardt, Chris Ferrall, Patrick Francois, George Neumann, and participants of workshops at CREFE (UQAM), Indiana, Iowa, Iowa State, Michigan State, Vanderbilt, and the Federal Reserve Bank of Chicago. Financial support from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged.
PY - 2002
Y1 - 2002
N2 - In this paper I analyse the directed search/matching problem in an economy with heterogeneous skills and skill-biased technology. A unique symmetric equilibrium exists and is socially efficient. Matching is partially mixed in the equilibrium. A high-tech firm receives both skilled and unskilled applicants with positive probability, and favours skilled workers, while a low-tech firm receives only unskilled applicants. The model generates wage inequality among identical unskilled workers, as well as between-skill inequality, despite the fact that all unskilled workers perform the same task and have the same productivity in the two types of firms. Inequality has interesting responses to skill-biased technological progress, a general productivity slowdown, and an exogenous increase in the skill supply elasticity.
AB - In this paper I analyse the directed search/matching problem in an economy with heterogeneous skills and skill-biased technology. A unique symmetric equilibrium exists and is socially efficient. Matching is partially mixed in the equilibrium. A high-tech firm receives both skilled and unskilled applicants with positive probability, and favours skilled workers, while a low-tech firm receives only unskilled applicants. The model generates wage inequality among identical unskilled workers, as well as between-skill inequality, despite the fact that all unskilled workers perform the same task and have the same productivity in the two types of firms. Inequality has interesting responses to skill-biased technological progress, a general productivity slowdown, and an exogenous increase in the skill supply elasticity.
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U2 - 10.1111/1467-937X.00213
DO - 10.1111/1467-937X.00213
M3 - Article
AN - SCOPUS:0036056727
SN - 0034-6527
VL - 69
SP - 467
EP - 491
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 2
ER -