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The Skill Premium, Technological Change and Appropriability

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  • Nahuis, R.
  • Smulders, J.A.

    (Tilburg University, Center for Economic Research)

Abstract

In the US the skill premium and the non-production/production wage differential increased strongly from the late 1970s onwards.Skill-biased technological change is now generally seen as the dominant explanation, which calls for theories to explain the bias.This paper shows that the increased supply of skill - which is usually seen as countervailing the rise in skill premiums - can actually cause rising skill premiums.The analysis starts from an R&D-driven endogenous growth model.Our key assumption is that skilled labour is employed in non-production activities that both generate and use knowledge inputs.If firms can sufficiently appropriate the intertemporal returns from these activities, skill premiums may rise with the supply of skilled labour.The degree of appropriability is endogenous and rises with the supply of skills.As a result, the skill premium first falls and then increases when skilled labour supply rises.Simultaneously, patents per dollar spent on R&D fall.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-56.

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Date of creation: 2000
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Handle: RePEc:dgr:kubcen:200056

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  1. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  2. Kiley, Michael T, 1999. "The Supply of Skilled Labour and Skill-Biased Technological Progress," Economic Journal, Royal Economic Society, vol. 109(458), pages 708-24, October.
  3. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
  4. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  5. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-82, June.
  6. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  7. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  8. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
  10. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  11. Smulders, J.A. & Klundert, T.C.M.J. van de, 1995. "Imperfect competition, concentration and growth with firm-specific R&D," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153407, Tilburg University.
  12. 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.
  13. 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, vol. 109(2), pages 367-97, May.
  14. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  15. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
  16. Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
  17. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
  18. Thompson, Peter & Waldo, Doug, 1994. "Growth and trustified capitalism," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 445-462, December.
  19. Keely, Louise & Quah, Danny, 1998. "Technology in Growth," CEPR Discussion Papers 1901, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. R. Nahuis & H.L.F. de Groot, 2003. "Rising skills premia: you ain't seen nothing yet," Working Papers 03-02, Utrecht School of Economics.
  2. Volker Grossmann, 2005. "White-collar employment, inequality, and technological change," Journal of Economics, Springer, vol. 86(1), pages 119-142, December.
  3. Lei Ji, 2013. "Rethinking directed technical change with endogenous market structure," Documents de Travail de l'OFCE 2013-18, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Keiichi Kishi, 2013. "Dynamic analysis of wage inequality and creative destruction," Discussion Papers in Economics and Business 13-20, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  5. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February.

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