IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v76y2022ics0927537122000446.html
   My bibliography  Save this article

ICT capital–skill complementarity and wage inequality: Evidence from OECD countries

Author

Listed:
  • Taniguchi, Hiroya
  • Yamada, Ken

Abstract

Although wage inequality has evolved in advanced countries over recent decades, it remains unknown the extent to which changes in wage inequality and their differences across countries are attributable to specific capital and labor quantities. We examine this issue by estimating a sector-level production function extended to allow for capital–skill complementarity and factor-biased technological change using cross-country and cross-industry panel data. Our results indicate that most of the changes in the skill premium are attributable to the relative quantities of ICT equipment, skilled labor, and unskilled labor in the goods and service sectors of the majority of advanced countries.

Suggested Citation

  • Taniguchi, Hiroya & Yamada, Ken, 2022. "ICT capital–skill complementarity and wage inequality: Evidence from OECD countries," Labour Economics, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:labeco:v:76:y:2022:i:c:s0927537122000446
    DOI: 10.1016/j.labeco.2022.102151
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537122000446
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.labeco.2022.102151?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    2. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    3. Linnea Polgreen & Pedro Silos, 2008. "Capital-Skill Complementarity and Inequality: A Sensitivity Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 302-313, April.
    4. Maya Eden & Paul Gaggl, 2018. "On the Welfare Implications of Automation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 15-43, July.
    5. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2022. "Quasi-Experimental Shift-Share Research Designs [Sampling-based vs. Design-based Uncertainty in Regression Analysis]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(1), pages 181-213.
    6. Fallon, P R & Layard, P R G, 1975. "Capital-Skill Complementarity, Income Distribution, and Output Accounting," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 279-301, April.
    7. Marcel P. Timmer & Mary O’Mahony & Bart van Ark, 2007. "EU KLEMS Growth and Productivity Accounts: An Overview," International Productivity Monitor, Centre for the Study of Living Standards, vol. 14, pages 71-85, Spring.
    8. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    9. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
    10. Charles Blackorby & R. Robert Russell, 1981. "The Morishima Elasticity of Substitution; Symmetry, Constancy, Separability, and its Relationship to the Hicks and Allen Elasticities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(1), pages 147-158.
    11. Ezra Oberfield & Devesh Raval, 2021. "Micro Data and Macro Technology," Econometrica, Econometric Society, vol. 89(2), pages 703-732, March.
    12. Diamond, Peter & McFadden, Daniel & Rodriguez, Miguel, 1978. "Measurement of the Elasticity of Factor Substitution and Bias of Technical Change," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 5, McMaster University Archive for the History of Economic Thought.
    13. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-888, September.
    14. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages 374-403, June.
    15. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    16. Thomas Niebel & Marianne Saam, 2016. "ICT and Growth: The Role of Rates of Return and Capital Prices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(2), pages 283-310, June.
    17. Jan Tinbergen, 1974. "Substitution Of Graduate By Other Labour," Kyklos, Wiley Blackwell, vol. 27(2), pages 217-226, January.
    18. Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(4), pages 631-653.
    19. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    20. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    21. Perez-Laborda, Alejandro & Perez-Sebastian, Fidel, 2020. "Capital-skill complementarity and biased technical change across US sectors," Journal of Macroeconomics, Elsevier, vol. 66(C).
    22. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 12, pages 1043-1171, Elsevier.
    23. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    24. Timmer, Marcel P. & O'Mahony, Mary & van Ark, Bart, 2007. "Growth and Productivity Accounts from EU KLEMS: An Overview," National Institute Economic Review, National Institute of Economic and Social Research, vol. 200, pages 64-78, April.
    25. Guy Michaels & Ashwini Natraj & John Van Reenen, 2010. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 Years," CEP Discussion Papers dp0987, Centre for Economic Performance, LSE.
    26. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
    27. Anthony Shorrocks, 2013. "Decomposition procedures for distributional analysis: a unified framework based on the Shapley value," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 99-126, March.
    28. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    29. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    30. Tinbergen, Jan, 1974. "Substitution of Graduate by Other Labour," Kyklos, Wiley Blackwell, vol. 27(2), pages 217-226.
    31. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    32. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, March.
    33. Francesco Caselli & Wilbur John Coleman II, 2002. "The U.S. Technology Frontier," American Economic Review, American Economic Association, vol. 92(2), pages 148-152, May.
    34. Matthew J. Lindquist, 2005. "Capital–Skill Complementarity and Inequality in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 711-735, December.
    35. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    36. Guy Michaels & Ashwini Natraj & John Van Reenen, 2014. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 60-77, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erik Brynjolfsson & Danielle Li & Lindsey R. Raymond, 2023. "Generative AI at Work," NBER Working Papers 31161, National Bureau of Economic Research, Inc.
    2. Albinowski, Maciej & Lewandowski, Piotr, 2022. "The Impact of ICT and Robots on Labour Market Outcomes of Demographic Groups in Europe," IZA Discussion Papers 15752, Institute of Labor Economics (IZA).
    3. Juzhong Zhuang, 2023. "Income and Wealth Inequality in Asia and the Pacific: Trends, Causes, and Policy Remedies," Asian Economic Policy Review, Japan Center for Economic Research, vol. 18(1), pages 15-41, January.
    4. A. A. Ternikov, 2023. "Artificial intelligence and the demand for skills in Russia," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 11.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. Battisti & M. Del Gatto & A. F. Gravina & C. F. Parmeter, 2021. "Robots versus labor skills: a complementarity/substitutability analysis," Working Paper CRENoS 202104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. Castex, Gonzalo & (Stanley) Cho, Sang-Wook & Dechter, Evgenia, 2022. "The decline in capital-skill complementarity," Journal of Economic Dynamics and Control, Elsevier, vol. 138(C).
    3. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    4. repec:ecb:ecbwps:20141800 is not listed on IDEAS
    5. David Hémous & Morten Olsen, 2022. "The Rise of the Machines: Automation, Horizontal Innovation, and Income Inequality," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 179-223, January.
    6. McAdam, Peter & Willman, Alpo, 2018. "Unraveling The Skill Premium," Macroeconomic Dynamics, Cambridge University Press, vol. 22(1), pages 33-62, January.
    7. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    8. Georg Graetz & Guy Michaels, 2018. "Robots at Work," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 753-768, December.
    9. vom Lehn, Christian, 2020. "Labor market polarization, the decline of routine work, and technological change: A quantitative analysis," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 62-80.
    10. Berg, Andrew & Buffie, Edward F. & Zanna, Luis-Felipe, 2018. "Should we fear the robot revolution? (The correct answer is yes)," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 117-148.
    11. Inoue, Emiko & Taniguchi, Hiroya & Yamada, Ken, 2022. "Measuring energy-saving technological change: International trends and differences," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    12. Florian Brugger & Christian Gehrke, 2017. "The Neoclassical Approach to Induced Technical Change: From Hicks to Acemoglu," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 730-776, November.
    13. Cavenaile, Laurent, 2021. "Offshoring, computerization, labor market polarization and top income inequality," Journal of Macroeconomics, Elsevier, vol. 69(C).
    14. Elisabetta Croci Angelini & Francesco Farina & Enzo Valentini, 2020. "Wage and employment by skill levels in technological evolution of South and East Europe," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1497-1514, November.
    15. Schulte, Patrick, 2021. "Skill Bias magnified: Identifying the role of international technology diffusion," Journal of International Economics, Elsevier, vol. 129(C).
    16. Unel, Bulent, 2010. "Analyzing skilled and unskilled labor efficiencies in the US," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 957-967, December.
    17. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
    18. Chen, Chaoran, 2020. "Capital-skill complementarity, sectoral labor productivity, and structural transformation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    19. Van Reenen, John, 2011. "Wage inequality, technology and trade: 21st century evidence," Labour Economics, Elsevier, vol. 18(6), pages 730-741.
    20. Einiö, Elias, 2015. "The Loss of Production Work: Identification of Demand Shifts Based on Local Soviet Trade Shocks," Working Papers 61, VATT Institute for Economic Research.
    21. Yeo, Yeongjun & Lee, Jeong-Dong, 2020. "Revitalizing the race between technology and education: Investigating the growth strategy for the knowledge-based economy based on a CGE analysis," Technology in Society, Elsevier, vol. 62(C).

    More about this item

    Keywords

    Skill premium; Capital-skill complementarity; Technological change; Information and communication technology (ICT); Production function;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:76:y:2022:i:c:s0927537122000446. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.