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What Happens When Agent T Gets a Computer? The Labor Market Impact of Cost Efficient Computer Adoption

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  • Borghans, Lex

    (Maastricht University)

  • ter Weel, Bas

    (SEO Amsterdam)

Abstract

This paper offers a model to explain how computer technology has changed the labor market. It demonstrates that wage differentials between computer users and non-users are consistent with the fact that computers are first introduced in high-wage jobs because of cost efficiency. Furthermore, skill upgrading occurs because of a reemphasis on non-routine tasks after computer adoption. The model also reveals that neither differences in computer skills nor complementary skills are needed to explain wage differentials between computer users and non-users, skill upgrading, and the changing organization and intensity of work. Finally, the predicted effects on the wage structure following the diffusion of computers are consistent with the empirical evidence.

Suggested Citation

  • Borghans, Lex & ter Weel, Bas, 2003. "What Happens When Agent T Gets a Computer? The Labor Market Impact of Cost Efficient Computer Adoption," IZA Discussion Papers 792, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp792
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    References listed on IDEAS

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    Cited by:

    1. Borghans, Lex & ter Weel, Bas, 2007. "The diffusion of computers and the distribution of wages," European Economic Review, Elsevier, vol. 51(3), pages 715-748, April.
    2. Schleife, Katrin, 2004. "Computer Use and the Employment Status of Older Workers: An Analysis Based on Individual Data," ZEW Discussion Papers 04-62, ZEW - Leibniz Centre for European Economic Research.
    3. İ. Akçomak & Lex Borghans & Bas Weel, 2011. "Measuring and Interpreting Trends in the Division of Labour in the Netherlands," De Economist, Springer, vol. 159(4), pages 435-482, December.
    4. Lex Borghans & Bas ter Weel, 2008. "Understanding the Technology of Computer Technology Diffusion: Explaining Computer Adoption Patterns and Implications for the Wage Structure," Journal of Income Distribution, Ad libros publications inc., vol. 17(3-4), pages 37-70, September.
    5. Lex Borghans & Bas Ter Weel & Bruce A. Weinberg, 2014. "People Skills and the Labor-Market Outcomes of Underrepresented Groups," ILR Review, Cornell University, ILR School, vol. 67(2), pages 287-334, April.
    6. Lex Borghans & Bas Weel, 2006. "The Division of Labour, Worker Organisation, and Technological Change," Economic Journal, Royal Economic Society, vol. 116(509), pages 45-72, February.
    7. Peter Dolton & Panu Pelkonen, 2007. "The Impact of Computer Use, Computer Skills and Computer Use Intensity: Evidence from WERS 2004," CEE Discussion Papers 0081, Centre for the Economics of Education, LSE.
    8. Lex Borghans & Bas Weel, 2006. "The Division of Labour, Worker Organisation, and Technological Change," Economic Journal, Royal Economic Society, vol. 116(509), pages 45-72, February.
    9. İ. Akçomak & Lex Borghans & Bas Weel, 2011. "Measuring and Interpreting Trends in the Division of Labour in the Netherlands," De Economist, Springer, vol. 159(4), pages 435-482, December.
    10. Borghans, Lex & Weel, Bas ter & Weinberg, Bruce A., 2005. "People People: Social Capital and the Labor-Market - Outcomes of Underrepresented Groups," Research Memorandum 002, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    11. Lex Borghans & Bas Ter Weel & Bruce A. Weinberg, 2014. "People Skills and the Labor-Market Outcomes of Underrepresented Groups," ILR Review, Cornell University, ILR School, vol. 67(2), pages 287-334, April.
    12. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks, And Skills," Journal of Regional Science, Wiley Blackwell, vol. 54(5), pages 856-892, November.
    13. Schleife, Katrin, 2005. "Computer Use and the Employment Status of Older Workers - An Analysis Based on Individual Data," Darmstadt Discussion Papers in Economics 145, Darmstadt University of Technology, Department of Law and Economics.
    14. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Cindy Zoghi & Sabrina Wulff Pabilonia, 2007. "Which workers gain upon adopting a computer?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(2), pages 423-444, May.
    17. Lex Borghans & Bas ter Weel, 2008. "Understanding the Technology of Computer Technology Diffusion: Explaining Computer Adoption Patterns and Implications for the Wage Structure," Journal of Income Distribution, Ad libros publications inc., vol. 17(3-4), pages 37-70, September.
    18. Young-Sung Lee, 2016. "Competition, Wage, and Agglomeration Diseconomy," International Regional Science Review, , vol. 39(3), pages 318-350, July.

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    More about this item

    Keywords

    wage differentials by skill; computer use and skill;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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