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Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification

Author

Listed:
  • Choong Hyun Nam

    (Economic Research Institute, Bank of Korea)

Abstract

This paper tries to explain why a certain type of technology is skill-biased. In contrast with existing literature, this paper regards skilled workers as overhead labour, and presents a model wherein skilled workers constitute a fixed input, required to produce a new product. The demand for skill increases with product variety, and information technology is skill-biased because it raises product variety by lowering the fixed cost of product creation. However, skill-biased change does not necessarily raise measured productivity because product diversification reallocates resources into fixed inputs, which is consistent with the historical fact that skill-biased change did not always accompany productivity growth.

Suggested Citation

  • Choong Hyun Nam, 2019. "Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification," Working Papers 2019-15, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1915
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    File URL: http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2019-15.pdf
    File Function: Working Paper, 2019
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    More about this item

    Keywords

    Skill demand; Product innovation; Inequality; Productivity;
    All these keywords.

    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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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