The Price of Polarization: Estimating Task Prices under Routine-Biased Technical Change

Economics

Speaker:Michael Boehm, Bonn University
Date: Friday 8 May 2015
Time: 16.15 - 17.45
Location: Matrix Lecture Theatre, Building One

Further details

The debate about the impact of routine-biased technical change (“RBTC”) on the labor market revolves around the question whether employment and wages polarized. This paper instead shows that RBTC’s main prediction is that the prices which are paid for routine tasks should decline compared to abstract and manual tasks (“task price polarization”). I propose a new method, which exploits the sorting of workers into tasks and their associated wage growth, to estimate the changes in task prices under relatively weak assumptions. Empirical results for males in two U.S. datasets reveal that workers’ wage growth depended on their sorting into tasks and that task prices polarized during the 1990s and 2000s. The estimates also go a long way in matching the evolution of the overall wage distribution. These results underscore the importance of RBTC and the tasks approach for explaining the changes in U.S. wage inequality over the last decades.