Computers and the Wage Structure

Abstract

A leading explanation for the growth of wage inequality is that greater use of information technology increased the demand for human capital. This paper identifies four different explanations for the relationships between computers, skills, and wages: computer-specific human capital, greater general human capital among computer users, greater general human capital for both users and nonusers due to contextual effects, and skill-biased changes in the job composition of the workforce. The paper tests the first three explanations and finds little support for them once pre-computer and other job characteristics are adequately controlled. This conclusion receives further support from a comparison of the timing of inequality growth and computer diffusion and from analyses of the contribution of computer use to overall inequality growth using DiNardo, Fortin, and Lemieux's (1996) reweighting standardization technique.

Citation

Handel, M.J. (2007), "Computers and the Wage Structure", Polachek, S.W. and Bargain, O. (Ed.) Aspects of Worker Well-Being (Research in Labor Economics, Vol. 26), Emerald Group Publishing Limited, Leeds, pp. 157-198. https://doi.org/10.1016/S0147-9121(06)26005-9