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The supply of skilled labor and skill-based technological progress

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  • Michael T. Kiley

Abstract

Rising inequality in the relative wages of skilled and unskilled labor is often attributed to skill-biased technological progress. This paper presents a model in which the adoption of skill-biased or "unskilled-biased" technologies is endogenous. Conventional wisdom states that an increase in the supply of skilled labor lowers the relative wage of skilled to unskilled labor. In this paper, an increase in the supply of skilled labor leads to temporary stagnation in the wages of unskilled workers and an expanding gap between the wages of skilled and unskilled workers through an acceleration of skill-biased technological change.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1997-45.

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Date of creation: 1997
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Handle: RePEc:fip:fedgfe:1997-45

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Keywords: Labor supply;

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  1. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  2. Greenwood, J., 1996. "The Third Industrial Revolution," RCER Working Papers 435, University of Rochester - Center for Economic Research (RCER).
  3. Daron Acemoglu, 1998. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," NBER Working Papers 6658, National Bureau of Economic Research, Inc.
  4. James A. Kahn & Jong-Soo Lim, 1997. "Skilled labor -- augmenting technical progress in U.S. manufacturing," Research Paper 9738, Federal Reserve Bank of New York.
  5. John Bound & George Johnson, 1995. "What are the causes of rising wage inequality in the United States?," Economic Policy Review, Federal Reserve Bank of New York, issue Jan, pages 9-17.
  6. 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.
  7. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-82, June.
  8. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, October.
    • Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, October.
  9. 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, vol. 101(3), pages 410-42, June.
  10. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  11. Machin, Stephen & Manning, Alan, 1997. "Can supply create its own demand? Implications for rising skill differentials," European Economic Review, Elsevier, vol. 41(3-5), pages 507-516, April.
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