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Skill-biased technological change and the business cycle

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  • Almut Balleer
  • Thijs van Rens

Abstract

Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Skill-biased technology shocks have no effect on the relative price of investment, suggesting that capital and skill are not complementary in aggregate production.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1079.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1079.

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Date of creation: Mar 2008
Date of revision: May 2012
Handle: RePEc:upf:upfgen:1079

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Skill-biased technology; skill premium; VAR; long-run restrictions; capital-skill complementarity; business cycle;

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  1. Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
  2. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
  3. Matthew J. Lindquist, 2004. "Capital-Skill Complementarity and Inequality Over the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 519-540, July.
  4. Canova, Fabio & López-Salido, J David & Michelacci, Claudio, 2008. "The Effects of Technology Shocks on Hours and Output: A Robustness Analysis," CEPR Discussion Papers 6720, C.E.P.R. Discussion Papers.
  5. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
  6. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, 04.
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Cited by:
  1. Fatih Guvenen & Serdar Ozkan & Jae Song, 2012. "The nature of countercyclical income risk," Staff Report 476, Federal Reserve Bank of Minneapolis.

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