No. 465 - Human capital, technical change and the welfare state

I study the interactions between the distribution of human capital, technological choice, and redistributive institutions. I first ask what makes alternative social contracts such as a European-style “welfare state” and US-style “laissez-faire” sustainable, and in particular how each is affected by skill-biased technical change. I then endogenize technological or organizational choice, and show that firms respond to greater human capital heterogeneity with more flexible technologies that further exacerbate wage equality. I then analyze the simultaneous determination of technology, income distribution, and redistributive institutions, and as well as spillovers between the social contracts of different countries.