Norges Bank

Working Paper

Top incomes, rising inequality, and welfare

Author:
Kevin J. Lansing and Agnieszka Markiewicz
Series:
Working Paper
Number:
10/2012

Abstract
This paper develops a general-equilibrium model of skill-biased technological change that approximates the observed shifts in the shares of wage and non-wage income going to the top decile of U.S. households since 1980. Under realistic assumptions, we find that all agents can benefit from the technology change, provided that the observed rise in redistributive transfers over this period is taken into account. We show that the increase in capital's share of total income and the presence of capital-entrepreneurial skill complementarity are two key features that help support the wages of ordinary workers as the new technology diffuses.

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ISSN 1502-8190 (online)

Published 23 October 2012 14:15
Published 23 October 2012 14:15