Skill biased technological change across the development spectrum

A central feature of development is the changing nature of the production process of goods and services. Typically, as countries become richer, production and trade patterns change with a higher share of domestic value added being generated through more sophisticated processes – both within agriculture, services and industries as well as due to a shift away from agriculture. During this process, most countries have witnessed a marked increase in the demand for skilled workers – in other words, the mirror image of such shifting of economic production is a change in occupations and, embedded, a transformation of the types of human skills used in an economy. Overall, occupations which require intensively manual skills give way to occupations requiring more cognitive skills. The most common explanation for these developments has been skill-biased technological change (SBTC) stemming from progress in new and more sophisticated industries, for example, Information and Communication Technologies (ICT) (Autor, Katz, Krueger 1998; Kelly 2007). Positive relations have been found also between demand for skills and research and development expenditures, innovation or other technology proxy variable. Alternative explanations for these upgrading of skills have been globalisation via foreign trade (Morrison Paul and Siegel 2001), including outsourcing (Geishecker 2006; Minondo and Rubert 2006); and organisational change (Caroli and Van Reenen 2001; Piva et al. 2005). The empirical literature investigating skill-biased technological change has mostly concentrated on high-income countries, but some recent contributions have investigated the issue for less developed countries (Kijima 2006 for India; Kang and Hong 2002 for Korea). Nevertheless, the cross-country comparative studies have also limited themselves to developed OECD countries (Berman et al. 1998) or added a scattered selection of developing countries around the world (Berman and Machin 2000; Cörvers and Jaanika, 20...