Occupational exposure to capital-embodied technology

What is the effect of technological change on income inequality? A vast literature suggests that skill-biased technological change (SBTC) is a mayor driver of income inequality. However, SBTC is a black box, much like total factor productivity (TFP) is to growth theory. To make progress on the effect of technology on inequality we need measurement. Theoretically, SBTC can be driven by capital-embodied technological change to the extent that capital and skills are complementary. In this paper, we explore the relationship between technological advancement and inequality by building measures of capital-embodied technological change at the occupation level. We document substantial heterogeneity in the degree of capital-skill complementarity across occupations. Importantly, we show that the role assigned to SBTC for the raise in employment in skill intensive occupations over the last 35 years is almost exclusively accounted for capital-embodied technological change. Finally, we show that the raise in the skill-premium over the same period is accounted for the dynamics of the capital labor ratio and factor complementarity in two occupations: technicians and low-skill services.