Munich Personal RePEc Archive

Skill-Biased Technological Change and Inequality in the U.S.

Ferrreira, Ana Melissa (2019): Skill-Biased Technological Change and Inequality in the U.S.

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Since the 1980’s, income inequality has increased markedly and is at the highest level ever since it has been recorded in the U.S. This paper uses an overlapping-generations model with incomplete markets that allows for household heterogeneity and that is calibrated to match the U.S. economy with the purpose to study how skill-biased technological change (SBTC) and changes in taxation quantitatively account for the increase in inequality from 1980 to 2010. We find that SBTC and taxation decrease account for 48% of the total increase in the income Gini coefficient. In particular, we conclude that SBTC alone accounted for 42% of the overall increase in income inequality, while changes in the progressivity of the income tax schedule alone accounted for 5,7%.

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