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Implications of Skill-Biased Technological Change: International Evidence

  • Berman, Eli

    ()

    (Department of Economics, Boston University and NBER)

  • Bound, John

    (Department of Economics, University of Michigan and NBER)

  • Machin, Stephen

    (Department of Economics, University College London, and Centre for Economic Performance, London School of Economics)

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 developing world is the principal culprit. The pervasiveness of this technological change is important for two reasons. First, it is an immediate and testable implication of technological change. Second, under standard assumptions, the more pervasive the skill biased technlogical change the greater the increase 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 do 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. First, across the OECD, most industries have increased the proportion of skilled workers employed despite rising or stable relative wages. Second, increases in demand for skills were concentrated in the same manufacturing industries in different developed countries.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 486.

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Length: 35 pages
Date of creation: 01 Jul 1997
Date of revision:
Publication status: Published in Quarterly Journal of Economics, 1998, pages 35.
Handle: RePEc:hhs:iuiwop:0486
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
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  1. Gordon H. Hanson & Ann Harrison, 1995. "Trade, Technology, and Wage Inequality," NBER Working Papers 5110, National Bureau of Economic Research, Inc.
  2. 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.
  3. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
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  5. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  6. 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.
  7. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
  8. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November.
  9. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  10. Kenneth R Troske, 1995. "The Worker-Establishment Characteristics Database," Working Papers 95-10, Center for Economic Studies, U.S. Census Bureau.
  11. 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.
  12. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  13. 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.
  14. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
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