This dissertation is about the rise in income inequality over the last three or four decades. The introductory chapter motivates the rest of the dissertation by discussing three stylized facts about rising inequality and by contrasting two alternative explanations for this trend. The first, and more traditional, explanation is that the demand for skills is increasing faster than the supply of those skills. Given workers in this story cannot update their skills, this leads to increasing skill wage gaps and subsequently to an overall widening of the income distribution. An alternative story, introduced in this dissertation, is not skills-based but is task-based. In this story, workers can update the bundle of tasks they supply to the market but task wages do not equalize because frictions in the task adjustment process prevent workers from doing so. In the model these task wage gaps translate into overall income inequality. This change in emphasis from skills to tasks has important policy implications for addressing inequality.
The second chapter develops and tests this "non-Ricardian" model of equilibrium task supply where such tasks are the proximate inputs to production. In the model, ex ante identical workers choose task supply and identical, competitive firms choose task demand. The model predicts that changes in task supply adjustment costs drive changes in the income distribution by creating a wedge between task wages. These predictions of the non-Ricardian model are verified in the data. Where the predictions of the model are in conflict with the canonical model of the wage distribution, the non-Ricardian models performs better empirically. Working through the mechanisms of this empirically validated model, increased task adjustment costs can explain much of the recent rise in income inequality.
Chapter three demonstrates that task adjustment costs are an important economic quantity. In this chapter, I characterize task-specific human capital as the abilities required to complete tasks performed on the job and then I define a task knowledge space where distances between jobs can be measured. To show the transferability of task-specific human capital, I use the tools of program evaluation to explore the effect of losing varying amount of task-specific human capital on displaced workers from the PSID data. Not only do displaced workers who switch tasks post-displacement see substantial long-run drops in earnings, those losses in earnings are larger the more different their post-displacement job is from their pre-displacement job, with respect to the tasks performed in the job. Using common estimates of discount rates and amortizing, this loss amounts to a lifetime cost of around 7 log points of earnings per year for workers that move the median distance in task space post-displacement (relative to those displaced workers that do not switch tasks). This chapter also validates the only novel assumption in the model of chapter two thus making counter-factual analysis with that model more credible.
Some of this task-specific human capital is lost when workers change careers, industries, occupations, employers and jobs while some of it is maintained when the worker moves about the labor market. Previous authors have associated this loss of human capital with labor market turbulence and others link increases in turbulence with increases in wage inequality. Chapter four explores the link between task-specific human capital and worker's decisions to navigate about the labor market over their careers. The chapter shows that depending on initial conditions, changes in the transferability of task-specific human capital can result in increases in income inequality. The chapter also discusses other trends that may account for the increase in task adjustment costs.
|Commitee:||Rendahl, Pontus, Stevens, Ann H.|
|School:||University of California, Davis|
|School Location:||United States -- California|
|Source:||DAI-A 73/01, Dissertation Abstracts International|
|Subjects:||Economics, Labor economics|
|Keywords:||Income inequality, Inequality, Labor adjustment costs, O*Net, Task-specific human capital, Tasks|
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