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Capital-Skill Complementarity? Evidence From A Panel Of Countries

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Author Info

  • Chris Papageorgiou

    ()
    (Louisiana State University)

  • Fidel Pérez Sebastián

    ()
    (Universidad de Alicante)

  • John Duffy

    (University of Pittsburgh)

Abstract

Since Griliches (1969), researchers have been intrigued by the idea that physical capital and skilled labor are relatively more complementary than physical capital and unskilled labor. This capital-skill complementarity hypothesis has received renewed attention recently, as researchers have suggested that this phenomenon might account for rising wage inequality between skilled and unskilled workers in several developed countries. In this paper we consider the cross-country evidence for capital--skill complementarity using a time-series, cross-section panel of 73 developed and less developed countries over a 25 year period. In particular, we focus on three empirical issues. First, what is the best specification of the aggregate production technology to address the capital-skill complementarity hypothesis. Second, how should we measure skilled labor? Finally, is there any cross-country evidence in support of the capital-skill complementarity hypothesis? Our main finding is that we are unable to reject the null hypothesis of no capital-skill complementarity using our panel data set.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-09.

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Length: 32 pages
Date of creation: Jul 2002
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2002-09

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Keywords: Input Complementarities; Production Function Estimation;

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  1. Fallon, P R & Layard, P R G, 1975. "Capital-Skill Complementarity, Income Distribution, and Output Accounting," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 279-301, April.
  2. Karnit Flug & Zvi Hercowitz, 2000. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 461-485, July.
  3. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August.
  4. Eli Berman & John Bound & Stephen Machin, 1997. "Implications of Skill-Biased Technological Change: International Evidence," Boston University - Institute for Economic Development 78, Boston University, Institute for Economic Development.
  5. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  6. Kumar, T Krishna & Gapinski, James H, 1974. "Nonlinear Estimation of the CES Production Parameters: A Monte Carlo Study," The Review of Economics and Statistics, MIT Press, vol. 56(4), pages 563-67, November.
  7. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  8. Thursby, Jerry, 1980. "Alternative CES Estimation Techniques," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 295-99, May.
  9. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
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