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The labor market effects of skill-biased technological change in Malaysia

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  • Marouani, Mohamed A.
  • Nilsson, Björn

Abstract

During the last half-century, the evolution of educational attainment in Malaysia has been spectacular, and the current enrollment rates suggest that this progression will continue. Such a transformation of the labor skill composition should bring about macroeconomic effects such as wage compression, sectoral shifts and high skill unemployment, unless compensatory mechanisms exist. Relying on decomposition techniques, we argue that skill biased technological change (SBTC) occurred in Malaysia in recent years, and permitted unemployment figures to remain low and skill premia not to sink. We also develop a dynamic general equilibrium model, simulating the absence of SBTC and limit the number of admissions to higher education. The results are fed to a microsimulation module. They show that the reduction in wage inequalities could have been substantially more important had SBTC not been present. Furthermore, they suggest that the open-door higher education policy has contributed heavily to a reduction in wage inequalities.

Suggested Citation

  • Marouani, Mohamed A. & Nilsson, Björn, 2016. "The labor market effects of skill-biased technological change in Malaysia," Economic Modelling, Elsevier, vol. 57(C), pages 55-75.
  • Handle: RePEc:eee:ecmode:v:57:y:2016:i:c:p:55-75 DOI: 10.1016/j.econmod.2016.04.009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
    2. Björn Nilsson, 2017. "The School-to-work transition in developing countries," Working Papers DT/2017/07, DIAL (Développement, Institutions et Mondialisation).
    3. Jung, Sungmoon & Lee, Jeong-Dong & Hwang, Won-Sik & Yeo, Yeongjun, 2017. "Growth versus equity: A CGE analysis for effects of factor-biased technical progress on economic growth and employment," Economic Modelling, Elsevier, vol. 60(C), pages 424-438.

    More about this item

    Keywords

    Skill acquisition; CGE; Education and the labor market; Input–output; Technological change;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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