Organizational change and rising wage inequality.

Summary We develop a model of organization change where the production of homogeneous good tates place under uncertain demand. In a two-stage duopoly game, firms choose first their organizational structure, and then determine market quantities and wages. Two results are highlighted. First, whether firms adopt organizational change or not depends on the volatility of demand and te availability of skilled labor. Second, organizational change generates a higher level of wage inequality both between and within education groups. This model provides thus a theoritical explanation for the rising wage inequality observed in major OECD countries, and its divergence among them.