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

  • Borghans, Lex

    ()

    (Maastricht University)

  • ter Weel, Bas

    ()

    (CPB Netherlands Bureau for Economic Policy Analysis)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 792.

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Length: 27 pages
Date of creation: Jun 2003
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2004, 54 (2), 137-151
Handle: RePEc:iza:izadps:dp792
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  1. Davies, Stephen W., 1979. "Inter-firm diffusion of process innovations," European Economic Review, Elsevier, vol. 12(4), pages 299-317, October.
  2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1279-1333, November.
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  4. Acemoglu, D., 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," Working papers 96-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Borghans Lex & Weel Bas ter, 2003. "Are computer skills the new basic skills? The returns to computer, writing and math skills in Britain," Research Memorandum 005, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  6. Luis Garicano & Esteban Rossi-Hansberg, 2004. "Inequality and the Organization of Knowledge," American Economic Review, American Economic Association, vol. 94(2), pages 197-202, May.
  7. DiNardo, John E & Pischke, Jorn-Steffen, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 291-303, February.
  8. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  9. Bresnahan, Timothy F, 1999. "Computerisation and Wage Dispersion: An Analytical Reinterpretation," Economic Journal, Royal Economic Society, vol. 109(456), pages F390-415, June.
  10. Borghans,L. & Weel,B.,ter, 2001. "What happens when agent T gets a computer?," ROA Research Memorandum 004, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  11. David H. Autor & Frank Levy & Richard J. Murnane, 2002. "Upstairs, downstairs: Computers and skills on two floors of a large bank," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(3), pages 432-447, April.
  12. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Barras, Richard, 1993. "Interactive innovation in financial and business services: The vanguard of the service revolution," Research Policy, Elsevier, vol. 22(2), pages 101-102, April.
  14. Chennells, Lucy & Van Reenen, John, 1997. "Technical Change and Earnings in British Establishments," Economica, London School of Economics and Political Science, vol. 64(256), pages 587-604, November.
  15. 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.
  16. Entorf, Horst & Kramarz, Francis, 1997. "Does unmeasured ability explain the higher wages of new technology workers?," European Economic Review, Elsevier, vol. 41(8), pages 1489-1509, August.
  17. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
  18. Alan B. Krueger, 1991. "How Computers Have Changed the Wage Structure: Evidence From Microdata, 1984-1989," NBER Working Papers 3858, National Bureau of Economic Research, Inc.
  19. Timothy F. Bresnahan & Manuel Trajtenberg, 1992. "General Purpose Technologies "Engines of Growth?"," NBER Working Papers 4148, National Bureau of Economic Research, Inc.
  20. Leora Friedberg, 2001. "The Impact of Technological Change on Older Workers: Evidence from Data on Computer Use," NBER Working Papers 8297, National Bureau of Economic Research, Inc.
  21. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
  22. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  23. Green, Francis & McIntosh, Steven, 2001. "The intensification of work in Europe," Labour Economics, Elsevier, vol. 8(2), pages 291-308, May.
  24. Weinberg, Bruce A., 2004. "Experience and Technology Adoption," IZA Discussion Papers 1051, Institute for the Study of Labor (IZA).
  25. Barras, Richard, 1990. "Interactive innovation in financial and business services: The vanguard of the service revolution," Research Policy, Elsevier, vol. 19(3), pages 215-237, June.
  26. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  27. Brian D. Bell, . "Skill-Biased Technical Change and Wages: Evidence from a Longitudinal Data Se," Economics Papers W25., Economics Group, Nuffield College, University of Oxford.
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