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Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

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  • Flug, Karnit
  • Hercowitz, Zui

Abstract

This paper estimates the effects of equipment investment on relative wages and employment of skilled labor and explores their dynamics. The basic hypothesis is that they are positive, due to either equipment-skill complementarity or to skill advantage in technology adoption. Using a panel data set with a wide rage of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a strong, positive effect of machinery investment on the relative demand for skilled labor.

Suggested Citation

  • Flug, Karnit & Hercowitz, Zui, 2010. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," IDB Publications (Working Papers) 1154, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:1154
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    Cited by:

    1. Richard G. Harris & Peter E Robertson, 2007. "The Dynamic Effects of the US Productivity Boom on Australia," The Economic Record, The Economic Society of Australia, vol. 83(s1), pages 35-45, September.
    2. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," Research Department Publications 4116, Inter-American Development Bank, Research Department.
    3. Ctirad Slavík & Hakki Yazici, 2019. "On the consequences of eliminating capital tax differentials," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(1), pages 225-252, February.
    4. De Palma, Francesco & Seegmuller, Thomas, 2005. "Dual Labor Market And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 9(3), pages 398-411, June.
    5. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2002. "General Purpose Technology and Wage Inequality," Journal of Economic Growth, Springer, vol. 7(4), pages 315-345, December.
    6. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
    7. Casarico, Alessandra & Devillanova, Carlo, 2008. "Capital-skill complementarity and the redistributive effects of Social Security Reform," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 672-683, April.
    8. Fidel Pérez Sebastián, 2008. "Testing Capital-Skill Complementarity Across Sectors in a Panel of Spanish Regions," Working Papers. Serie EC 2008-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    9. Lydon, Reamonn & Scally, John, 2014. "Trends in Business Investment," Quarterly Bulletin Articles, Central Bank of Ireland, pages 76-89, January.
    10. Slavík, Ctirad & Yazici, Hakki, 2014. "Machines, buildings, and optimal dynamic taxes," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 47-61.
    11. Li-Ju Chen, 2016. "Women in Politics: A New Instrument for Studying the Impact of Education on Growth," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(2), pages 251-275, August.
    12. López-Bazo, Enrique & Moreno, Rosina, 2008. "Does human capital stimulate investment in physical capital?: Evidence from a cost system framework," Economic Modelling, Elsevier, vol. 25(6), pages 1295-1305, November.
    13. Francesco de Palma & Thomas Seegmuller, 2005. "Dual Labor Market and Endogenous Fluctuations," Post-Print halshs-00194165, HAL.
    14. Eduardo Lora & Mauricio Olivera, 1998. "Políticas macro y problemas del empleo en América Latina," Research Department Publications 4117, Inter-American Development Bank, Research Department.
    15. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    16. Richard G. Harris & Peter E. Robertson, 2007. "Dynamic Adjustments to Terms of Trade Shocks: The USA Productivity Boom and Australia," Discussion Papers 2007-16, School of Economics, The University of New South Wales.
    17. repec:pri:cepsud:113krusell is not listed on IDEAS
    18. Stephen Kosempel, 2007. "Interaction between knowledge and technology: a contribution to the theory of development," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1237-1260, November.
    19. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The Effects of Technical Change on Labor Market Inequalities," Working Papers 89, Princeton University, Department of Economics, Center for Economic Policy Studies..
    20. Sami SAAFI & Fouzi SBOUI, 2011. "LES OPPORTUNITES DES INVESTISSEMENTS DIRECTS ETRANGERS LES OPPORTUNITES DES INVESTISSEMENTS DIRECTS ETRANGERS, DIFFUSION TECHNOLOGIQUE ET DEMANDE DE LA MAIN-D’OEUVRE PAR QUALIFICATION DES INDUSTRIES T," Working Papers 240, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.
    21. Carlo Devillanova & Michele Di Maio & Pietro Vertova, 2006. "Labour Mobility, Capital-Skill Complementarity and the Redistributive Effects of Trade Integration," KITeS Working Papers 188, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2006.
    22. Pandey, Manish, 2008. "Human capital aggregation and relative wages across countries," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1587-1601, December.

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    More about this item

    Keywords

    WP-331;

    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

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