O-ring wage inequality

Alberto Dalmazzo*, Tuomas Pekkarinen, Pasquale Scaramozzino

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We examine the relationship between technological complexity and wage inequality, using an efficiency wage model that adopts Kremer's O-ring production function. The model has two main implications: (i) when the production process becomes more complex, within-task wage differences increase between plants, and (ii) between-task wage differences increase within plants. We study these implications empirically using industry data providing quantified information on the complexity of the tasks. We find that wages increase in all the tasks with the complexity of the production process. Furthermore, the relationship between the complexity of the tasks and wages is steepest in the firms with more complex production processes.

Original languageEnglish
Pages (from-to)515-536
Number of pages22
JournalECONOMICA
Volume74
Issue number295
DOIs
Publication statusPublished - Aug 2007
MoE publication typeA1 Journal article-refereed

Keywords

  • TECHNOLOGICAL-CHANGE
  • EFFICIENCY WAGES
  • SKILLED LABOR
  • UNEMPLOYMENT
  • DEMAND
  • DIFFERENTIALS
  • ORGANIZATION
  • DISPERSION
  • COMPLEXITY
  • EMPLOYMENT

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