Skill-biased technological change has long been linked to rising wage inequality. New technologies also allow firms to expand their scope of their operation. We formalize such quantity-biased technological change and calibrate the model to German-matched employer-employee data. The calibration attributes substantial changes in the firm size distribution and in wages to this channel. Quantity-biased technological change spreads out the firm size distribution with a moderating influence on wage inequality within blue and white-collar occupations, yet it increases inequality between these occupations. The quantity-bias component in the blue-collar occupations alone moderates inequality within and between occupations.
- Economics and Econometrics