PUB - Publikationen an der Universität Bielefeld

In this paper, we study the effect of different types of technological regime changes on the evolution of industry concentration and wage inequality. Using a calibrated agent-based macroeconomic framework, the Eurace@Unibi model, we consider sce- narios where the new regime is characterized by a finite time period of more frequent respectively more substantial changes in the frontier technology compared to the old regime. We show that under both scenarios, the regime change leads to an increase in the heterogeneity of productivity in the firm population and to increased market con- centration, where effects are much less pronounced if the new regime differs from the old one with respect to the frequency of innovations. If the new regime is char- acterized by an increase of the size of the frontier jumps along the technological trajectory, the evolution of the wage inequality has an inverted U-shape with a large fraction of workers profiting in the very long run from high wages offered by dom- inant high-tech firms. Finally, it is shown that (observable) heterogeneity of worker skills plays an important role in generating these dynamic effects of technological regime changes.