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New Goods and Rising Skill Premium: An Empirical Investigation


  • Chong Xiang

    (University of Michigan)


This paper identifies and measures new goods in the U.S. manufacturing sector in the late 1970s and 1980s, and finds that: (i) The average skilled-labor intensity of new goods exceeds that of old goods by over 40%; (ii) even within 4-digit industries, new goods are slightly more skilled-labor intensive than old goods (by about 4%); (iii) new goods can account for about 30% of the increase in the relative demand for skilled labor. Therefore, new goods help explain the rising skill premium in the U.S. Furthermore, new goods provide a direct measure of technological changes so that this paper provides new evidence that technology has shifted demand in favor of skilled labor and finds that a sizeable "between" component of the rise in the relative demand for skilled labor is due to technology.

Suggested Citation

  • Chong Xiang, 2002. "New Goods and Rising Skill Premium: An Empirical Investigation," Working Papers 479, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:479

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    More about this item


    new goods; rising skill premium; technology; average skilled-labor intensity; relative demand for skilled labor;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General


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