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Skill-Biased Technological Change, Unemployment, And Brain Drain

Author

Listed:
  • Harald Fadinger
  • Karin Mayr

Abstract

We develop a model of directed technology adoption, frictional unemployment, and migration to examine the effects of a change in skill endowments on the wages, employment rates, and emigration rates of skilled and unskilled workers. We find that, depending on the elasticity of substitution between skilled and unskilled workers and the elasticity of the matching function, an increase in the skill ratio can reduce both the relative unemployment rate and the relative emigration rate (brain drain) of skilled workers. We provide numerical simulations to support our findings and show that the effects are empirically relevant and potentially sizable.

Suggested Citation

  • Harald Fadinger & Karin Mayr, 2014. "Skill-Biased Technological Change, Unemployment, And Brain Drain," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 397-431, April.
    • Handle: RePEc:bla:jeurec:v:12:y:2014:i:2:p:397-431
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    File URL: http://hdl.handle.net/10.1111/jeea.12049
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    Citations

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    Cited by:

    1. Jonas Loebbing, 2020. "Redistributive Income Taxation with Directed Technical Change," CESifo Working Paper Series 8743, CESifo.
    2. Ribeiro, Marcos & Prettner, Klaus, 2025. "The Skill Premium Across Countries in the Era of Industrial Robots and Generative AI," MPRA Paper 124633, University Library of Munich, Germany, revised 28 Apr 2025.
    3. Oscar Afonso & Manuela Magalhães, 2021. "The role of intellectual property rights in a directed technical change model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2142-2176, April.
    4. Exadaktylos, Dimitrios & Riccaboni, Massimo & Rungi, Armando, 2024. "Talents from abroad. Foreign managers and productivity in the United Kingdom," International Economics, Elsevier, vol. 177(C).
    5. Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2025. "Artificial intelligence and the skill premium," Finance Research Letters, Elsevier, vol. 81(C).
    6. Dario Cords & Klaus Prettner, 2022. "Technological unemployment revisited: automation in a search and matching framework [The future of work: meeting the global challenges of demographic change and automation]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 115-135.
    7. Raphaël Franck, 2024. "Labor scarcity, technology adoption and innovation: evidence from the cholera pandemics in 19th century France," Journal of Economic Growth, Springer, vol. 29(4), pages 543-583, December.
    8. Roxana Idu, 2019. "Source Country Economic Development and Dynamics of the Skill Composition of Emigration," Economies, MDPI, vol. 7(1), pages 1-18, March.
    9. Loebbing, Jonas, 2020. "Redistributive Income Taxation with Directed Technical Change," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224606, Verein für Socialpolitik / German Economic Association.
    10. repec:cfe:wpcefa:2017_02 is not listed on IDEAS
    11. Leite, Duarte N. & Afonso, Óscar & Silva, Sandra T., 2019. "A tale of two countries: Directed technical change, trade and migratory movements," Economic Modelling, Elsevier, vol. 83(C), pages 173-194.
    12. Gil, Pedro Mazeda & Afonso, Oscar & Brito, Paulo, 2019. "Economic growth, the high-tech sector, and the high skilled: Theory and quantitative implications," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 89-105.
    13. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Explaining the Labor Share: Automation Vs Labor Market Institutions," Labour Economics, Elsevier, vol. 75(C).

    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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