IDEAS home Printed from https://ideas.repec.org/p/aug/augsbe/0236.html

Directed Sector and Skill-Specific Technological Change: The Development of Wages for the High and Low Skilled

Author

Listed:
  • Juergen Antony

Abstract

This paper presents a dynamic two sector, two skill groups model of endogenous skill and sector specific technological change. The sectors refer to a "high-tech” and a "low-tech” sector of an economy. The direction of technological change is driven by market forces determined by the skill composition of the work force. It is shown that a change in this skill composition - a higher growth rate of the high skilled workforce in the "high-tech” sector than in the "low-tech” sector - leads to an increasing relative wage of the high skilled despite the fact that the aggregate supply of the high skilled might rise. This directed technological adjustment can easily overcome the usual substitution effect which would lead the relative wage to fall. The important result of the model is that the result does not depend on high values of the elasticity of substitution as necessary in other models of directed technological change, e.g. Acemoglu (1998, 2001). Further some of these models can be interpreted as special cases of the present model. Some open economy extensions show how effects of the mentioned change in the skill composition of the work force can spill over from one country to another if both countries engage in free trade and if the state of technology is determined globally.

Suggested Citation

  • Juergen Antony, 2003. "Directed Sector and Skill-Specific Technological Change: The Development of Wages for the High and Low Skilled," Discussion Paper Series 236, Universitaet Augsburg, Institute for Economics.
    • Handle: RePEc:aug:augsbe:0236
    as

    Download full text from publisher

    File URL: https://opus.bibliothek.uni-augsburg.de/opus4/files/34730/236.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1245-1279.
    2. Haskel, Jonathan E. & Slaughter, Matthew J., 2002. "Does the sector bias of skill-biased technical change explain changing skill premia?," European Economic Review, Elsevier, vol. 46(10), pages 1757-1783, December.
    3. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 563-606.
    4. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
    5. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    6. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    7. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    8. Stiglitz, Joseph E, 1969. "Allocation of Heterogeneous Capital Goods in a Two-Sector Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 373-390, October.
    9. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    10. Daron Acemoglu, 2003. "Patterns of Skill Premia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 199-230.
    11. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    12. Kiley, Michael T, 1999. "The Supply of Skilled Labour and Skill-Biased Technological Progress," Economic Journal, Royal Economic Society, vol. 109(458), pages 708-724, October.
    13. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    2. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, September.
    3. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
    4. Svaleryd, Helena & Vlachos, Jonas, 2005. "Factor Supplies and the Direction of Technical Change," Working Paper Series 640, Research Institute of Industrial Economics.
    5. Pi, Jiancai & Zhang, Pengqing, 2018. "Skill-biased technological change and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 347-362.
    6. Afonso, Oscar, 2008. "The impact of government intervention on wage inequality without scale effects," Economic Modelling, Elsevier, vol. 25(2), pages 351-362, March.
    7. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    8. Vlachos, Jonas & Svaleryd, Helena, 2005. "Factor Supplies and the Direction of Technological Change," CEPR Discussion Papers 5086, C.E.P.R. Discussion Papers.
    9. Florian Brugger & Christian Gehrke, 2017. "The Neoclassical Approach to Induced Technical Change: From Hicks to Acemoglu," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 730-776, November.
    10. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.
    11. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    12. Chu, Angus C. & Cozzi, Guido & Furukawa, Yuichi, 2016. "Unions, innovation and cross-country wage inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 64(C), pages 104-118.
    13. Lutz Hendricks, 2010. "Cross-country variation in educational attainment: structural change or within-industry skill upgrading?," Journal of Economic Growth, Springer, vol. 15(3), pages 205-233, September.
    14. Paolo Epifani, 2003. "Trade liberalization, Firm Performances and Labor Market Outcomes in the Developing World, what Can We Learn From Micro-Level Data?," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 455-486.
    15. Pi, Jiancai & Zhang, Pengqing, 2021. "Redistribution and wage inequality," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 510-523.
    16. Daniel Traca & Pushan Dutt, 2005. "Trade and the skill-bias: it's not how much, but with whom you trade," Working Papers CEB 05-010.RS, ULB -- Universite Libre de Bruxelles.
    17. Bucci, Alberto, 2008. "Population growth in a model of economic growth with human capital accumulation and horizontal R&D," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1124-1147, September.
    18. Guido Cozzi & Giammario Impullitti, 2010. "Government Spending Composition, Technical Change, and Wage Inequality," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1325-1358, December.
    19. Malchow-Møller, Nikolaj & Skaksen, Jan Rose, 2003. "Skill-Biased Technological Change in Denmark: A Disaggregate Perspective," IZA Discussion Papers 752, Institute of Labor Economics (IZA).
    20. Antonio Ciccone & Elias Papaioannou, 2009. "Human Capital, the Structure of Production, and Growth," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 66-82, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aug:augsbe:0236. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Simone Raab-Kratzmeier (email available below). General contact details of provider: https://edirc.repec.org/data/ivaugde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.