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The supply of skilled labor and skill-based technological progress

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  • Michael T. Kiley

Abstract

Rising inequality in the relative wages of skilled and unskilled labor is often attributed to skill-biased technological progress. This paper presents a model in which the adoption of skill-biased or "unskilled-biased" technologies is endogenous. Conventional wisdom states that an increase in the supply of skilled labor lowers the relative wage of skilled to unskilled labor. In this paper, an increase in the supply of skilled labor leads to temporary stagnation in the wages of unskilled workers and an expanding gap between the wages of skilled and unskilled workers through an acceleration of skill-biased technological change.

Suggested Citation

  • Michael T. Kiley, 1997. "The supply of skilled labor and skill-based technological progress," Finance and Economics Discussion Series 1997-45, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:1997-45
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    References listed on IDEAS

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    1. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    2. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    3. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, January.
      • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, July.
    4. James A. Kahn & Jong-Soo Lim, 1998. "Skilled Labor-Augmenting Technical Progress in U. S. Manufacturing," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1281-1308.
    5. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
    6. Jeremy Greenwood, 1999. "The Third Industrial Revolution," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-12.
    7. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    8. Machin, Stephen & Manning, Alan, 1997. "Can supply create its own demand? Implications for rising skill differentials," European Economic Review, Elsevier, vol. 41(3-5), pages 507-516, April.
    9. John Bound & George Johnson, 1995. "What are the causes of rising wage inequality in the United States?," Economic Policy Review, Federal Reserve Bank of New York, issue Jan, pages 9-17.
    10. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    11. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
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    Keywords

    Labor supply;

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