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Skill-Biased Technological Change and the Business Cycle

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  • Balleer, Almut
  • van Rens, Thijs

Abstract

Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Skill-biased technology shocks have no effect on the relative price of investment, suggesting that capital and skill are not complementary in aggregate production.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8410.

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Date of creation: Jun 2011
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Handle: RePEc:cpr:ceprdp:8410

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Keywords: business cycle; capital-skill complementarity; long-run restrictions; skill premium; skill-biased technology; VAR;

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References

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  1. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, April.
  2. Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
  3. Matthew J. Lindquist, 2004. "Capital-Skill Complementarity and Inequality Over the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 519-540, July.
  4. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
  5. Canova, Fabio & López-Salido, J David & Michelacci, Claudio, 2008. "The Effects of Technology Shocks on Hours and Output: A Robustness Analysis," CEPR Discussion Papers 6720, C.E.P.R. Discussion Papers.
  6. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, July.
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Cited by:
  1. Fatih Guvenen & Serdar Ozkan & Jae Song, 2012. "The nature of countercyclical income risk," Staff Report 476, Federal Reserve Bank of Minneapolis.

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