This dissertation studies the impact of technological progress on various aspects of the U.S. labor markets such as the recent decline in the labor's share of income, job and wage polarization, rising income and wealth inequalities and skill accumulation. Chapter 1, "Capital-Task Complementarity and the Decline of the U.S. Labor Share of Income," studies how changes in occupational composition of the labor force contributes to the recent decline of the US labor share of income. Following the job polarization literature and classifying labor by tasks performed, I estimate unitary elasticity between equipment capital and labor performing non-routine tasks. This implies that income loss of labor em- ployed in routine task occupations is the main driver of the decline of the aggregate labor share. For a given path of technological change, decline of the labor share is larger when: (i) the substitutability between equipment capital and routine tasks is stronger, and (ii) equip- ment capital has a larger weight in production. Furthermore, a dynamic general equilibrium model shows that the impact of permanent technology shocks on the labor share gets smaller as the fraction of routine task labor declines. Consistent with this, the model predicts that the labor share should stabilize at around 55% in the long-run even if technological progress continues at its current pace. The model also documents that the fall in relative equipment capital prices alone can explain 72% of the decline of the labor share for the 1967-2013 period. Finally, repeating the analysis by disaggregating labor into educational groups reveals that the theory based on capital-task interactions improves on the capital-skill complementarity theory in explaining the decline of the labor share. Chapter 2, "Impact of Information Technology on the Labor Share: Evidence from the U.S. Sectoral Data," contributes to the debate over the relationship between capital deep- ening and the aggregate labor share from a sectoral perspective. The study focuses on a specific group of equipment capital: information and communication technology (ICT) capital and exploits various sectoral heterogeneities to characterize the conditions under which the surge in ICT capital cause the labor share to fall. First, I document significant capital- task complementarity at each sector. Second, decline in ICT capital prices turns out to have a positive impact on the labor share. However, gains of labor devoted to non-routine task occupations are offset by the losses of labor employed in routine task occupations when a sector has: (i) initially high load of employment in routine task occupations, and (ii) weak absolute complementarity between ICT capital and labor working in occupations associated with non-routine tasks. Since sectors satisfying these two conditions have compromised the majority of the economy, the aggregate labor share has exhibited a downward trend so far, leading to the illusion that information technology has been driving the labor share downwards. However, there are two promising facts concerning the future: in one hand, the share of these sectors in value added is persistently falling and on the other hand, the share of routine task employment continues to fall at every sector. Thus, once the structural shifts and within sectoral adjustments are completed, the decline in the labor share should revert back. Chapter 3, "Job Polarization, Skill Accumulation and Wealth Inequality," is one of the first attempts in literature to incorporate the job polarization idea into an otherwise standard incomplete markets model with heterogeneous agents in two dimensions: skills and idiosyn- cratic productivity shocks. This set up allows us to contribute to the existing literature in two ways: (i) linking job polarization with rising wealth concentration, and (ii) modeling the continuous rise in skill supply in response to technological progress and job polarization accompanying it over time. When calibrated and solved for the years 1981 and 2011, the model shows that the decline in relative computer (ICT) capital prices alone accounts for a significant portion of the increases in employment share and relative wages of high skill occupations, as well as the increase in the supply of labor with a college or above-college degree. Consistent with the routinization hypothesis, the model also shows that advances in computer technology can account for most of the decline of the employment share and rela- tive wage of middle class over the three decades between 1981 and 2011. Furthermore, the model successfully captures the erosion of middle-class wealth, whereas wealth concentration rises substantially at the right tail and slightly at the left tail of the wealth distribution.

This dissertation consists of three essays in applied microeconomics. These essays investigate different aspects of the impact of technology on labor market outcomes and firm strategy. The first essay, co-authored with Ronald L. Oaxaca, is in the area of labor economics and it investigates the relation between non-neutral technological change and the gender gap in wages. This essay is the first to address the issue of the recent narrowing of the gender wage gap in the context of technological change by using a novel approach to separately estimate the effects of technological change and discrimination on the gender wage gap. Using a constant elasticity of substitution production function and Current Population Survey data on employment and wages by industry and occupation, the results show that changes in non-neutral technological change explain between 5% and 9% of the narrowing of the wage gap between 1979 and 2001. The latter two essays span topics across applied industrial organization, firm strategy and labor economics. The second component of my dissertation investigates the relation between technological knowledge diffusion through the labor mobility of scientists and the organization of R & D activities by innovative firms. Using a labor mobility measure from the Current Population Survey March Supplements as a measure for inter-firm technology spillovers and a panel of R & D alliance data for 18 U.S. industries between 1989 and 1999, a Poisson estimation shows that firms facing a 10% increase in the labor mobility of scientists have a 5% increase in the annual number of R & D collaborations. The third essay is an empirical analysis of the impact of knowledge dissemination generated by the labor mobility of scientists and engineers on a measure of the pace of innovation. Using an unbalanced panel of firms containing patent data matched with firm data across eight innovative industries, from 1989 to 1998, along with a measure of the labor mobility of scientists and engineers, this essay provides evidence that firms in industries exposed to levels of labor mobility of scientists and engineers that differ by 1%, have an expected time lag between sequential generations of technologies that differs by 0.56 years.

My dissertation consists of three essays in empirical labor economics which are self-contained and can be read independently of the others. The first essay, coauthored with Professor Modestino, measures mismatch unemployment in US economy in the post-recession era and explores the heterogeneity among educational groupings. The second essay estimates the changing effects of cognitive ability on wage determination of college bound and non-college bound young adults between 1980s and 2000s. The third essay, coauthored with Professor Dickens, examines the impact of measurement error in survey data on identifying the extent of downward nominal wage rigidity in US economy. Essay I: No Longer Qualified? Changes in the Supply and Demand for Skills within Occupations-- In this study, we extend the framework developed by Sahin et al. (2014) to measure mismatch unemployment since the end of the Great Recession and explore the heterogeneity among educational groupings. Our findings indicate that mismatch across two-digit industries and two- digit occupations explain around 17- 20 percent of the recent recovery in the US unemployment rate since 2010. We also capture movements in employer education requirements over time using a novel database of 87 million online job posting aggregated by Burning Glass Technologies and further show that mismatch is not only greater in magnitude for high-skill occupations but also is more persistent over the course of the recent labor market recovery, possible accounting for the shift rightward that has been observed in the aggregate Beveridge Curve by other researchers. Furthermore, we shed light on at least one of the potential causes of mismatch on the demand side, providing evidence that labor demand shifts among high-skilled occupation groups exhibit a permanent increase in the share of employers requiring a Bachelor's degree as well as other baseline, specialized, and software skills listed on job postings, suggesting a role for structural shifts associated with changes in technology or capital investment. Our results demonstrate that equilibrium models where unemployed workers accumulate specific human capital and, in equilibrium, make explicit mobility decisions across distinct labor markets, can mean that workers are chasing a moving target-at least among high-skilled occupations. Furthermore, our findings inform debates focused on workforce development strategies and related educational policies where decision making could benefit from the use of real-time labor market information on employer demands to provide guidance for both job placement as well as program development. Essay II: The Changing Impacts of Cognitive Ability on Determining Earnings of College Bound and Non-College Bound Young Adults-- Using data on young adults from the 1979 and 1997 National Longitudinal Survey of Youth, I investigate the changing impact of cognitive ability, as captured by performance on AFQT tests, on wage determination of college bound and non-college bound young adults. My findings indicate that cognitive ability plays a substantially diminished role for the most recent cohort and its impact on wage determination has undergone a drastic change between 1980s and 2000s. My results tend to corroborate the findings of previous studies which emphasize the lifecycle path of technological development from adoption to maturation and trace back the labor market outcomes observed over these periods to pre- and post-2000 patterns in technology investment and its consequent boom-and-bust cycles in the demand for cognitive skills. Essay III: Measurement Error in Survey Data and its Impact on Identifying the Extent of Downward Nominal Wage Rigidity-- In this study, we employ data drawn from the 1996, 2001, 2004 and 2008 panels of the SIPP, which cover the years 1996-2013, to assess the effectiveness of dependent interviewing at reducing bias in the estimates of the extent of downward nominal wage rigidity in the US economy. In the 2004 and 2008 panels of the SIPP, dependent interviewing was used much more extensively than in the past. This questioning method by focusing on changes rather than levels of wages and using responses from prior interviews to query apparent inconsistencies over time reduces the incidence of reporting and measurement errors. Our change-in-wage distributions derived from SIPP 2004 and 2008 panels exhibit remarkably larger zero-spikes and asymmetries vis-℗♭℗ -vis those derived from 1996 and 2001 panels before dependent interviewing was used. These results are consistent with the findings of previous studies that used payroll data or statistical techniques to correct for reporting error. We apply one such technique to the SIPP panels before and after the introduction of dependent interviewing. In the pre-2004 panels the correction is large and results in a distribution that closely resembles the uncorrected distributions of the 2004 panel. When the correction is applied to the 2004 panel no evidence of errors is found.

This paper uses a DSGE model to simulate the impact of technological change on labor markets and income distribution. It finds that technological advances offers prospects for stronger productivity and growth, but brings risks of increased income polarization. This calls for inclusive policies tailored to country-specific circumstances and preferences, such as investment in human capital to facilitate retooling of low-skilled workers so that they can partake in the gains of technological change, and redistributive policies (such as differentiated income tax cuts) to help reallocate gains. Policies are also needed to facilitate the process of adjustment.

This report addresses a number of issues that have surfaced in the debates over the impact of technological change on employment. These issues include the effects of technological change on levels of employment and unemployment within the economy; on the displacement of workers in specific industries or sectors of the economy; on skill requirements; on the welfare of women, minorities, and labor force entrants in a technologically transformed economy; and on the organization of the firm and the workplace. It concludes that technological change will contribute significantly to growth in employment opportunities and wages, although workers in specific occupations and industries may have to move among jobs and careers. Recommends initiatives and options to assist workers in making such transitions. ISBN 0-309-03744-1 (pbk.).