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Handbook on the Economic Complexity of Technological Change

Handbook on the Economic Complexity of Technological Change

Elgar original reference

Edited by Cristiano Antonelli

This comprehensive and innovative Handbook applies the tools of the economics of complexity to analyse the causes and effects of technological and structural change. It grafts the intuitions of the economics of complexity into the tradition of analysis based upon the Schumpeterian and Marshallian legacies.

Chapter 10: The Biomedical Workforce in the US: An Example of Positive Feedbacks

Paula E. Stephan

Subjects: economics and finance, economics of innovation, evolutionary economics, innovation and technology, economics of innovation


Paula E. Stephan1 1. INTRODUCTION The standard neoclassical model of the labor market assumes that negative feedbacks occur, causing the market to self-correct if it is out of equilibrium. Thus, for example, an oversupply of workers in a specific sector leads wages to decline relative to those in other sectors. This in turn leads to a decrease in supply, resulting in an eventual increase in wages. The contraction in supply is accomplished through the outward mobility of workers to higher wage sectors as well as the choice by potential entrants of alternative sectors in which to work. In the 1970s radical political economists proposed that not all labor markets were characterized by negative feedback. Instead, they argued that, because of segmentation, labor markets existed in the secondary sector that were characterized by positive feedbacks. As a result, low relative wages persisted, coupled with signs of oversupply. Moreover, they argued that the welfare system was an ‘integral part of this vicious circle’ acting on the one hand to provide ‘a payroll subsidy to secondary employers’ and on the other hand, to maintain ‘living levels low enough to force a steady flow of labor supply into the secondary labor market’ (Vietorisz and Harrison, 1973: 366). While dual labor market economists focused on the low-wage-low-skill sector, in recent years several scholars have suggested that positive feedback is not limited to the low-skill sector. Indeed, a market which has many positive feedback characteristics is thriving among those who have ten-plus years of post-baccalaureate training....

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