@TechReport{iza:izadps:dp909,
            	author={Leonardi, Marco},
            	title={Firm Heterogeneity in Capital/Labor Ratios and Wage Inequality},
            	year={2003},
	month={Oct},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={909},
            	url={https://www.iza.org/publications/dp909},
	abstract={This paper provides some empirical evidence and a theory of the relationship between
residual wage inequality and the increasing dispersion of capital/labor ratios across firms. I
document the increasing variance of capital/labor ratios across firms in the US labor market. I
also show that the increase in the capital intensity variance across firms is associated with
the increasing wage variance across workers. To explain this empirical fact, I adopt a search
model where firms differ in their optimal capital investment. The decline in the relative price of
equipment capital makes the firm distribution of capital/labor ratios more dispersed. In a
frictional labor market, this force generates wage dispersion among identical workers. Simple
calibration of the model indicates that the dispersion of capital/labor ratios can account for
about one third of the total increase in residual wage inequality.},
	keywords={capital intensity;wage inequality;search models},
            }