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Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

Author

Listed:
  • Karnit Flug

    (Bank of Israel)

  • Zvi Hercowitz

    (Tel Aviv University and Bank of Israel)

Abstract

The effects of equipment investment on relative wages and employment of skilled labor are estimated. The basic hypothesis is that such effects are positive, due to the presence of either equipment-skill complementarity or skill advantage in technology adoption. Using a panel data set for a wide range of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a positive and strong effect of machinery investment on the relative demand for skilled labor, with the relative wage responding much sooner and for a much shorter time than relative employment. (Copyright: Elsevier)

Suggested Citation

  • Karnit Flug & Zvi Hercowitz, 2000. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 461-485, July.
  • Handle: RePEc:red:issued:v:3:y:2000:i:3:p:461-485
    DOI: 10.1006/redy.1999.0080
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    More about this item

    Keywords

    equipment investment; skill premium;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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