Richter, Barbara
(2013)
Essays on the skill premium and the skill bias of technological change.
PhD thesis, London School of Economics and Political Science.
Abstract
Using a two-sector model of production with potentially different capital shares
in each sector, I show that the evolution of the skill premium from 1970 to 2005
is consistent with skill-neutrality and even a mild unskill-bias of technological
change for plausible values of capital shares. The main channel of adjustment to
changes in labor supply is instead via the reallocation of capital. New investment
occurs predominantly in the skilled sector, to the detriment of the unskilled sector
of the economy. This result is shown both theoretically in a simple model and in
a quantitative exercise using data on the US economy.
Repeating the exercise with industry level data for the US reveals that there
has indeed been skill-biased technological change in a number of industries (such
as Business Activities and Health), while others have experienced skill neutral
and unskill-biased technological change (e.g. Agriculture). This difference in
results across industries is largely due to very different capital shares.
Finally, I look at the impact of the increasing importance of information and
communication technology (ICT) on the production function and the skill premium in each industry. I estimate a translog price function with skilled and unskilled labor, ICT capital and non-ICT capital as factors of production and find
that most industries exhibit ICT capital-skill complementarity. For most industries, technological progress has led to an increased use of both types of capital,
but the results on skill-biased technological change are as mixed as in chapter
two. ICT has affected the skill premium negatively in nearly two thirds of the
industries studied.
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