This paper provides a quantitative theory for the recent rise in residual wage inequality consistent with the empirical observation that a sizable part of this increase has a transitory nature, a feature that eludes standard models based on ex ante heterogeneity in ability. An acceleration in the rate of quality improvement of equipment, like the one observed from the early 1970s, increases the productivity/quality differentials across machines (jobs). In a frictional labor market, this force translates into higher wage dispersion even among ex ante equal workers. With vintage-human capital, the acceleration reduces workers' capacity to transfer skills from old to new machines, generating a rise in the cross-sectional variance of skills, and therefore of wages. Through calibration, the paper shows that this mechanism can account for 30 percent of the surge in residual inequality in the U. S. economy (or for most of its transitory component). Two key implications of the theory—faster within-job wage growth and larger wage losses upon displacement—find empirical support in the data.

A central requirement in the design of a legal system is the protection of law enforcers from coercion by litigants through either violence or bribes. The higher the risk of coercion, the greater the need for protection and control of law enforcers by the state. Such control, however, also makes law enforcers beholden to the state, and politicizes justice. This perspective explains why, starting in the twelfth and thirteenth centuries, the relatively more peaceful England developed trials by independent juries, while the less peaceful France relied on state-employed judges to resolve disputes. It may also explain many differences between common and civil law traditions with respect to both the structure of legal systems and the observed social and economic outcomes.

The last three decades have witnessed the rise of a pohtical gender gap in the United States wherein more women than men favor the Democratic party. We trace this development to the decline in marriage, which we posit has made men richer and women poorer. Data for the United States support this argument. First, there is a strong positive correlation between state divorce prevalence and the political gender gap—higher divorce prevalence reduces support for the Democrats among men but not women. Second, longitudinal data show that following marriage (divorce), women are less (more) likely to support the Democratic party.

We investigate the hypothesis that the combination of three related innovations—1) information technology (IT), 2) complementary workplace reorganization, and 3) new products and services—constitute a significant skill-biased technical change affecting labor demand in the United States. Using detailed firm-level data, we find evidence of complementarities among all three of these innovations in factor demand and productivity regressions. In addition, firms that adopt these innovations tend to use more skilled labor. The effects of IT on labor demand are greater when IT is combined with the particular organizational investments we identify, highlighting the importance of IT-enabled organizational change.