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Is Technology Factor-Neutral? Evidence from the US Manufacturing Sector

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Abstract

This paper analyses the neutrality of technology using data from the NBER-CES Manufacturing industry database. We show that technology has a positive effect on the skilled-to-unskilled labour and wage ratios, offering a skill-premium for these skilled workers. We also find that technology has become more favourable towards skilled labour since the eighties, thereby, explaining the rise in the relative abundance of skilled workers. Finally, differences in productivity among the two labour inputs are important when they are relatively poor substitutes, despite the increase in the elasticity of substitution between unskilled and skilled labour that occurred over the past decades.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 26/2012.

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Date of creation: 2012
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Handle: RePEc:nip:nipewp:26/2012

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Keywords: Technological progress; skill premium; industry-level data.;

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  1. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 517-549, May.
  2. Matthew F. Mitchell, 2001. "Specialization and the skill premium in the 20th century," Staff Report 290, Federal Reserve Bank of Minneapolis.
  3. 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.
  4. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  5. Francesco Caselli & Wilbur John Coleman II, 2000. "The World Technology Frontier," NBER Working Papers 7904, National Bureau of Economic Research, Inc.
  6. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
  7. Kenneth I. Carlaw & Richard G. Lipsey, 2003. "Productivity, Technology and Economic Growth: What is the Relationship?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 457-495, 07.
  8. Stephen Machin & John Van Reenen, 1998. "Technology and changes in skill structure: evidence from seven OECD countries," IFS Working Papers W98/04, Institute for Fiscal Studies.
  9. Luca Agnello & Ricardo M. Sousa, 2012. "Fiscall Adjustments and Income Inequality:A First Assessment," NIPE Working Papers 19/2012, NIPE - Universidade do Minho.
  10. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  11. Keith Sill, 2002. "Widening the wage gap: the skill premium and technology," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 25-32.
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