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Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

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  • Karnit Flug

    (Research Department, Bank of Israel)

  • Zvi Hercowitz

    (Tel Aviv University and Bank of Israel)

Abstract

The effects of equipment investment on relative wages and employment of skilled labor are estimated. The basic hypothesis is that such effects are positive, due to the presence of either equipment-skill complementarity or skill advantage in technology adoption. Using a panel data set for a wide range of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a positive and strong effect of machinery investment on the relative demand for skilled labor, with the relative wage responding much sooner and for a much shorter time than relative employment. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0080
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Bibliographic Info

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

Volume (Year): 3 (2000)
Issue (Month): 3 (July)
Pages: 461-485

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Handle: RePEc:red:issued:v:3:y:2000:i:3:p:461-485

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Keywords: equipment investment; skill premium;

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  1. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 410-42, June.
  2. Cooley, T.F. & Greenwood, J. & Yorukoglu, M., 1997. "The Replacement Problem," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 444, University of Rochester - Center for Economic Research (RCER).
  3. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
  4. Eli Berman & John Bound & Stephen Machin, 1998. "Implications Of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1245-1279, November.
  5. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9510, University of Western Ontario, Department of Economics.
  6. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  7. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
  8. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  9. Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 429, University of Rochester - Center for Economic Research (RCER).
  10. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  11. Boyan Jovanovic, 1995. "Learning and Growth," NBER Working Papers 5383, National Bureau of Economic Research, Inc.
  12. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, American Economic Association, vol. 82(3), pages 371-92, June.
  13. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number gord90-1.
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