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Abstract

This dissertation examines forces shaping economic inequality in the United States. Through three interconnected essays, I investigate how shifting consumer preferences, technological progress, and workplace hierarchies influence income distribution and gender pay gaps. Chapter 2 explores the role of changing consumer demand in driving structural transformation. It introduces a novel framework that incorporates time-varying demand shifters – Demand Growth Factors (DGFs) – to capture exogenous changes in demand that are independent of traditional price and income effects. Using US data from 1989-2021, I show that evolving consumer preferences play a significant role in driving sectoral composition. I find substantial differences in demand growth rates across goods: goods that are produced by relatively more non-routine manual and routine cognitive occupations, such as landscaping services and theatres, experience the highest annual demand growth rates. Chapter 3 applies this framework to analyze income inequality and shows that changes in consumer demand have played a crucial role in moderating income inequality, counteracting the deleterious effects of technological change. Counterfactual analysis reveals that without changes in consumer demand, captured by DGFs, the increase in income inequality would have been 73% larger over the period 1989-2021 in the US. Changes in demand have particularly benefited workers in service-oriented sectors traditionally viewed as less productive, such as accommodation and personal care. Chapter 4 (joint with Nicole Fortin and Marit Rehavi) examines how inequality manifests in specific institutional contexts, focusing on the role of new managers for gender pay disparities in the U.S. Federal Civil Service over the period 1982-2014. Applying event study design to over 30 years of rich administrative data, we find that, despite the highly regulated administrative pay system, female employees benefit more from having a female manager, with their pay increasing by an additional 1.5 log points relative to their male counterparts with male managers. These effects are more pronounced for employees in less routine occupations, where managerial discretion plays a larger role, showing how workplace hierarchies interact with the changing nature of work in the era of technological change to shape gender pay gaps even in settings with formalized pay structures.