Technological uncertainty and earnings dispersion

This thesis investigates the hypothesis that new technologies temporarily raise earnings inequality. These are due to periods of increased uncertainty that follow new inventions, due to variations in unobserved abilities to adapt to or use the new technology. Over time the technology becomes more common and these abilities become less important. This thesis looks for evidence that these phenomena occur first in occupational or industry fields “close” to the new technology.; The thesis finds evidence of this. In doing so it may help provide a more precise explanation of the cause of the rise in income inequality in the U.S. between 1970 and 1996. This rise maybe one example of a phenomenon observed many times.; The U.S. iron industry adopted mass production steel technology during the 1865–1880 period and grew dramatically. This was a period of technological change, including process, product, price, and organizational uncertainty. There is evidence that during this period of technological uncertainty there was a rise in earnings inequality among workers in the blast furnace industry and the rolling mill industry. These were the industries that expanded into steel. With data from the Weeks report, an 1880 U.S. Census survey of firms and job earnings, I construct a wage regression and look for the predicted effects in wage inequality within worker populations defined by industry or job content, taking the historical context into account. The hypothesis that income inequality rose in the affected workforce is supported.; The other study is of the experiences of engineering and related occupations and industries following the introduction of commercial microprocessors in 1971. There is anecdotal evidence of ongoing uncertainty in related industries at this time. Earnings inequality rose within occupations and industries close to the microprocessor during this time. The evidence toward the hypothesis is murkier than in the steel case. There is evidence of a temporary rise in dispersion in the computer equipment business and among electrical engineers and later among some software developers.