Event

Technological Innovation and the Distribution of Labor Income Growth

  • Conférencier  Leonid Kogan – MIT

  • Lieu

    Luxembourg School of Finance JFK Building 29,Avenue J.F Kennedy L-1855 Luxembourg Ground Floor, Nancy Room

    LU

  • Thème(s)
    Finance

Abstract

We examine how the distribution of worker earnings growth shifts

following major technological advances by the firm, or its competitors,

using administrative data from the US. Specifically, we find that own firm

innovation is associated with a modest increase in worker earnings

growth, while innovation by competing firms is related to lower future

worker earnings. Importantly, these earnings changes are

asymmetrically distributed across workers: both gains and losses are

concentrated on a subset of workers, which implies that the distribution

of worker earnings growth rates becomes more right- or left-skewed

following innovation by the firm, or its competitors, respectively. These

effects are particularly strong for the highest-paid workers. Our results

suggest innovation is associated with a substantial increase in the labor

income risk, especially for workers at the top of the earnings distribution.

Our simulations reveal that the increased disparity in innovation

outcomes across firms in the 1990s can account for a significant part of

the rise in income inequality. In sum, our evidence is consistent with the

view that innovation leads to substantial reallocation in labor income

across workers through creative destruction in the product market and

displacement of their human capital.