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Abstract:

cover
CEP Discussion Paper
Technical Change and Superstar Effects: Evidence from the Roll-Out of Television
Felix Koenig
November 2019
Paper No' CEPDP1663:
Full Paper (pdf)

JEL Classification: J31; J23; O33; D31


Tags: superstar effect; inequality; top incomes; technical change

Technical change that improves economies of scale can generate fast income growth among top earners at the expense of everyone else. I test this classic “superstar model” in the labor market for entertainers where the historic roll-out of television led to a natural experiment in scale-related technological change. The launch of a local TV station multiplied audiences of top entertainers nearly fourfold and resulted in a 50% increase of the top percentile’s income share, a more right-skewed income distribution, and significant income losses for lower ranked entertainers. The results confirm the predictions of the “superstar model” and are at odds with canonical models of skill-biased technological change.