Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology

While intermediate inputs account for more than half of a final product's value, intersectoral linkages have been ignored as a source of skill bias. Previous empirical studies have investigated skill demand at the worker-, firm-, and sector-level. This paper integrates intersectoral linkages and complementarities into the standard skill-biased technical change (SBTC) framework. In a simple multi-sector model, we allow skill-biased intermediate technology to raise skill bias in final production. The model predicts a multiplier effect that augments small sector-level skill bias into a large aggregate impact on skill demand. We construct a proxy for the skill bias embedded in each sector's intermediate products: input skill intensity. This variable correlates strongly with the skill share employed in final production -- a novel stylized fact that points towards an intersectoral technology-skill complementarity. Together with input-output linkages, the observed complementarity reinforces skill demand along the production chain. The effect is large, accounting for more than one third of the observed skill upgrading in U.S. manufacturing.