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Implications of skill-biased technological change: international evidence

  • E. Berman
  • J. Bound
  • S. Machin

Demand for less skilled workers decreased dramatically in the US and in other developed countries over the past two decades. WE argue that pervasive skill-biased technological change, rather than increased trade with the development world, is the principal culprit. The pervasiveness of this technological change is important for two reasons. Firstly, it is an immediate and testable implication of technological change. Secondly, under standard assumptions, the more pervasive the skill-biased technological, the greater the increase in the embodied supply of less skilled workers and the greater the increase in the embodied supply if less skilled workers and the greater the increases in the embodied supply of less skilled workers and the greater the depressing effect on their relative wages through world goods prices. In contrast, in the Heckscher-Ohlin model with small open economies the skill-bias of local technological changes does not affect wages. Thus, pervasiveness deals with a major criticism of skill-biased technological as a cause. Testing the implications of pervasive, skill-biased technological change, we find strong supporting evidence. Firstly, across the OECD, most industries have increased the proportion of skilled workers employed, despite rising or stable relative wages. Secondly, increases in demand for skills were concentrated in the same manufacturing industries in different developed countries.

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File URL: http://eprints.lse.ac.uk/20314/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20314.

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Length: 45 pages
Date of creation: Sep 1997
Date of revision:
Handle: RePEc:ehl:lserod:20314
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  1. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  2. Kenneth R. Troske, 1998. "The Worker-Establishment Characteristics Database," NBER Chapters, in: Labor Statistics Measurement Issues, pages 371-404 National Bureau of Economic Research, Inc.
  3. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
  4. Lawrence F. Katz & Ana L. Revenga, 1989. "Changes in the Structure of Wages: The U.S. versus Japan," NBER Working Papers 3021, National Bureau of Economic Research, Inc.
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  6. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  7. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  8. Levy, Frank & Murnane, Richard J, 1996. "With What Skills Are Computers a Complement?," American Economic Review, American Economic Association, vol. 86(2), pages 258-62, May.
  9. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  10. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  11. Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
  12. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  13. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  14. Donald Siegel, 1998. "The Impact Of Technological Change On Employment: Evidence From A Firm-Level Survey Of Long Island Manufacturers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(2-4), pages 227-246.
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