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Capital-Skill Complementarity and Inequality: A Sensitivity Analysis

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  • Linnea Polgreen

    (University of Iowa)

  • Pedro Silos

    (Federal Reserve Bank of Atlanta)

Abstract

In "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis", Krusell, Ohanian, Rios-Rull, and Violante (2000) (KORV hereafter) analyzed the capital-skill complementarity hypothesis as an explanation for the behavior of the U.S. skill premium. We re-fit KORV's model with two alternative capital equipment price series: one proposed by Greenwood et al. (GHK, 1997) and the official, revised National Income and Product Accounts (NIPA) data. We find that capital-skill complementarity is preserved, but other results were sensitive to the data used. Specifically, the fit of the model was similar to KORV's using the NIPA data, but not the GHK data. Also, both series produce estimates of the elasticity of substitution between unskilled labor and equipment that are substantially larger than KORV's estimates. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 2 (April)
Pages: 302-313

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Handle: RePEc:red:issued:06-82

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Keywords: Capital-skill complementarity; Technological change; Equipment prices;

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References

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Citations

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Cited by:
  1. Ariell Reshef, 2008. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," 2008 Meeting Papers 235, Society for Economic Dynamics.
  2. Jonathan Vogel & Javier Cravino & Ariel Burstein, 2011. "Importing Skill-Biased Technology," 2011 Meeting Papers 440, Society for Economic Dynamics.
  3. Sang-Wook (Stanley) Cho & Juliàn P. Dìaz, 2014. "Accounting for Skill Premium Patterns during the EU Accession: Productivity or Trade?," Discussion Papers 2014-14, School of Economics, The University of New South Wales.
  4. Michael Ben-Gad, 2008. "Capital-Skill Complementarity and the Immigration Surplus," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 335-365, April.
  5. Andri Chassamboulli & Theodore Palivos, 2010. "“Give me your Tired, your Poor,” so I can Prosper: Immigration in Search Equilibrium," University of Cyprus Working Papers in Economics 12-2010, University of Cyprus Department of Economics.
  6. Manuel A. Hidalgo Pérez & Jesús Rodríguez López & José Mª O.Kean Alonso, 2008. "Labor demand and information technologies: evidence for Spain, 1980-2005," Economic Working Papers at Centro de Estudios Andaluces E2008/13, Centro de Estudios Andaluces.
  7. Federico Mandelman & Andrei Zlate, 2010. "Immigration, remittances and business cycles," International Finance Discussion Papers 998, Board of Governors of the Federal Reserve System (U.S.).
  8. Ariell Reshef, 2012. "Online Appendix to "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation"," Technical Appendices 11-241, Review of Economic Dynamics.
  9. Linnea Polgreen & Pedro Silos, 2005. "Capital-skill complementarity and inequality: a sensitivity analysis," Working Paper 2005-20, Federal Reserve Bank of Atlanta.
  10. Polgreen, Linnea & Silos, Pedro, 2009. "Crude substitution: The cyclical dynamics of oil prices and the skill premium," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 409-418, April.
  11. Chassamboulli, Andri & Palivos, Theodore, 2012. "A Search-Equilibrium Approach to the Effects of Immigration on Labor Market Outcomes," MPRA Paper 43297, University Library of Munich, Germany.
  12. Oleksiy Kryvtsov & Alexander Ueberfeldt, 2007. "Schooling, Inequality and Government Policy," Working Papers 07-12, Bank of Canada.

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