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Returns to Human Capital and Investment in New Technology

  • Rodolfo Luzio
  • Steven Vincent Dunaway
  • Martin David Kaufman
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    This paper presents a simple framework that illustrates the link between skill-based wage differentiation and human capital acquisition given skill-biased technical progress. The analysis points to the economic costs resulting from labor market and income redistribution policies that prevent the skill premium from playing its role in fostering human capital accumulation and the adoption of new technologies. The study compares key economic indicators among Canada, France, Germany, the United Kingdom, and the United States. Differences in wage differen-tiation and investment in new technologies among these countries could be related to policies affecting labor markets; such practices may reflect social choices.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/133.

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    Length: 30
    Date of creation: 01 Sep 2001
    Date of revision:
    Handle: RePEc:imf:imfwpa:01/133
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    1. William Blankenau, 1999. "A Welfare Analysis of Policy Responses to the Skilled Wage Premium," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 820-849, October.
    2. 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.
    3. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Jonathan E. Haskel & Matthew J. Slaughter, 1998. "Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?," NBER Working Papers 6565, National Bureau of Economic Research, Inc.
    5. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
    6. 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..
    7. Machin, S. & Van Reenen, J., 1997. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," Papers 24, Centre for Economic Performance & Institute of Economics.
    8. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 354-385.
    9. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May.
    10. Dan Devroye & Richard B. Freeman, 2002. "Does inequality in skills explain inequality of earnings across advanced countries?," LSE Research Online Documents on Economics 20058, London School of Economics and Political Science, LSE Library.
    11. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    12. Christopher J. Gust & Jaime R. Marquez, 2000. "Productivity developments abroad," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 665-681.
    13. Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc.
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