Essays on Technological Change and Inequality

This collection of essays attempts to address the question: how does recent technological progress shape inequality in the labor market? In the first chapter, I document and investigate life-cycle profiles of skill premiums across cohorts. My empirical analysis shows that younger cohorts have steeper growth in the skill premium before age 40 but flatter growth after 40. I use a human capital investment model to account for the cross-cohort variation in skill premium profiles. The results indicate that the flattened growth after age 40 is caused by the drop in human capital (of high-skill workers) near the end of the life cycle. Besides, the magnitude of life-cycle growth in the skill premium is mainly driven by the relative skill price. In chapter two and three, I study how technology usage affects earnings growth and earnings inequality over the life-cycle. In chapter 2, I construct a novel index to identify technology usage at the individual level using occupations as the proxy. I document technology usage patterns over the life-cycle and investigate its empirical relationship with labor earnings. I find that technology usage accounts for more than one-third of the growth in life-cycle inequality. In chapter 3, I develop a life-cycle model with endogenous human capital investments and technology choices to quantify the relative importance of technology usage. The model features rich interactions between technology and human capital such that workers with high human capital are more likely to work with advanced technologies and vice versa. I find that technology usage contributes 31% of the growth in mean earnings and 46% of the growth in life-cycle inequality. I also evaluate policy implications of non-linear taxation on labor earnings. When tax progressivity on labor earnings is changed from US to European levels, the college attainment rate drops by 7 percentage points, and the growth in mean earnings decreases by 23%.