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Increasing Returns to Scale Within Limits: A Model of ICT and its Effect on the Income Distribution and Occupation Choice

Wang, Tianxi and Wright, Greg C (2020) 'Increasing Returns to Scale Within Limits: A Model of ICT and its Effect on the Income Distribution and Occupation Choice.' Journal of Economic Theory, 189. ISSN 0022-0531 (In Press)

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Abstract

A key feature of Information and Communication Technologies (ICT) is that they increase the size of the market - or the "scale of operation" - for workers in some occupations. We model the scale of operation as the limit up to which the production technology displays increasing returns to scale. We then explore the implications of this feature of ICT for the income distribution within affected occupations, as well as for individuals' occupational choices. Within occupations, an increase in the scale of operation intensifies competition between workers and increases inequality. It also drives the lowest-ability workers out of the occupation while reducing the earnings of the next lowest-ability work- ers when the substitutability between the output of the affected occupations and that of the rest of the economy is low.

Item Type: Article
Uncontrolled Keywords: income inequality, technological change, increasing returns to scale
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Elements
Date Deposited: 17 Aug 2020 12:17
Last Modified: 24 Sep 2020 16:15
URI: http://repository.essex.ac.uk/id/eprint/28499

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