Technical change and superstar effects: evidence from the roll-out of television
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.
15 November 2019 Paper Number CEPDP1663
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This CEP discussion paper is published under the centre's Labour programme.