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Implications of Skill-Biased Technological Change: International Evidence

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  • E Berman
  • J Bound
  • Stephen Machin

Abstract

Demand for less skilled workers decreased dramatically in the US and in other developed countries over the past two decades. WE argue that pervasive skill-biased technological change, rather than increased trade with the development world, is the principal culprit. The pervasiveness of this technological change is important for two reasons. Firstly, it is an immediate and testable implication of technological change. Secondly, under standard assumptions, the more pervasive the skill-biased technological, the greater the increase in the embodied supply of less skilled workers and the greater the increase in the embodied supply if less skilled workers and the greater the increases in the embodied supply of less skilled workers and the greater the depressing effect on their relative wages through world goods prices. In contrast, in the Heckscher-Ohlin model with small open economies the skill-bias of local technological changes does not affect wages. Thus, pervasiveness deals with a major criticism of skill-biased technological as a cause. Testing the implications of pervasive, skill-biased technological change, we find strong supporting evidence. Firstly, across the OECD, most industries have increased the proportion of skilled workers employed, despite rising or stable relative wages. Secondly, increases in demand for skills were concentrated in the same manufacturing industries in different developed countries.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0367.

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Date of creation: Sep 1997
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Handle: RePEc:cep:cepdps:dp0367

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  2. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  3. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
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  5. Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
  6. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  7. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
  8. Levy, Frank & Murnane, Richard J, 1996. "With What Skills Are Computers a Complement?," American Economic Review, American Economic Association, vol. 86(2), pages 258-62, May.
  9. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers, California Davis - Institute of Governmental Affairs 95-14, California Davis - Institute of Governmental Affairs.
  10. repec:fth:prinin:377 is not listed on IDEAS
  11. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  12. Lawrence F. Katz & Ana L. Revenga, 1989. "Changes in the Structure of Wages: The U.S. versus Japan," NBER Working Papers 3021, National Bureau of Economic Research, Inc.
  13. Kenneth R Troske, 1995. "The Worker-Establishment Characteristics Database," Working Papers 95-10, Center for Economic Studies, U.S. Census Bureau.
  14. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  15. Donald Siegel, 1998. "The Impact Of Technological Change On Employment: Evidence From A Firm-Level Survey Of Long Island Manufacturers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(2-4), pages 227-246.
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