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What Happens When Agent T Gets a Computer? The Labor Market Impact of Cost Efficient Computer Adoption

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  • Borghans, Lex

    ()
    (Maastricht University)

  • ter Weel, Bas

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This paper offers a model to explain how computer technology has changed the labor market. It demonstrates that wage differentials between computer users and non-users are consistent with the fact that computers are first introduced in high-wage jobs because of cost efficiency. Furthermore, skill upgrading occurs because of a reemphasis on non-routine tasks after computer adoption. The model also reveals that neither differences in computer skills nor complementary skills are needed to explain wage differentials between computer users and non-users, skill upgrading, and the changing organization and intensity of work. Finally, the predicted effects on the wage structure following the diffusion of computers are consistent with the empirical evidence.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 792.

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Length: 27 pages
Date of creation: Jun 2003
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2004, 54 (2), 137-151
Handle: RePEc:iza:izadps:dp792

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Keywords: wage differentials by skill; computer use and skill;

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  1. Borghans, Lex & ter Weel, Bas, 2003. "Are Computer Skills the New Basic Skills? The Returns to Computer, Writing and Math Skills in Britain," IZA Discussion Papers 751, Institute for the Study of Labor (IZA).
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  3. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," ROA Research Memorandum, Maastricht University, Research Centre for Education and the Labour Market (ROA) 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
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  6. 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.
  7. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  8. Entorf, Horst & Kramarz, Francis, 1997. "Does unmeasured ability explain the higher wages of new technology workers?," European Economic Review, Elsevier, Elsevier, vol. 41(8), pages 1489-1509, August.
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  15. Borghans,L. & Weel,B.,ter, 2001. "What happens when agent T gets a computer?," ROA Research Memorandum, Maastricht University, Research Centre for Education and the Labour Market (ROA) 004, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  16. Luis Garicano & Esteban Rossi-Hansberg, 2004. "Inequality and the Organization of Knowledge," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 197-202, May.
  17. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Chennells, Lucy & Van Reenen, John, 1997. "Technical Change and Earnings in British Establishments," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(256), pages 587-604, November.
  19. Barras, Richard, 1990. "Interactive innovation in financial and business services: The vanguard of the service revolution," Research Policy, Elsevier, Elsevier, vol. 19(3), pages 215-237, June.
  20. Brian D. Bell, . "Skill-Biased Technical Change and Wages: Evidence from a Longitudinal Data Se," Economics Papers, Economics Group, Nuffield College, University of Oxford W25., Economics Group, Nuffield College, University of Oxford.
  21. Levy, Frank & Murnane, Richard J, 1996. "With What Skills Are Computers a Complement?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 258-62, May.
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  23. Weinberg, Bruce A., 2004. "Experience and Technology Adoption," IZA Discussion Papers 1051, Institute for the Study of Labor (IZA).
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