Capital-skill complementarity and biased technical change across US sectors

Alejandro Perez-Laborda and Fidel Perez-Sebastian
Authors registered in the RePEc Author Service: Fidel Perez Sebastian

Journal of Macroeconomics, 2020, vol. 66, issue C

Abstract: The goal of this paper is two-fold. First, we reexamine the evidence for the capital-skill complementarity (CSC) and the skill-biased technological change (SBTC) hypotheses at the sectoral level in the US economy for the period 1970–2005. Second, we quantify their effect on the evolution of the wage skill premium. To do so, we estimate a translog model with three production factors (skilled labor, unskilled labor, and capital) for different sets of industry aggregates suggested by the literature. At the aggregated level, we find that both CSC and SBTC explain a substantial part of the observed change in the skill premium. The CSC hypothesis also receives support across sectors, although SBTC often explains a larger part of the premium change. We also find that the relevance of CSC increases with the level of aggregation of the data. Besides, when we disaggregate capital into ICT and non-ICT, our results suggest that often ICT capital is not the primary source of CSC. However, ICT-CSC is the most important driver of the skill premium in specific sectors, such as financial and business services.

Keywords: Capital-skill complementarity; Biased technical change; Skill premium; Labor share; Translog; ICT capital (search for similar items in EconPapers)
JEL-codes: O40 O47 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:66:y:2020:i:c:s0164070420301804

DOI: 10.1016/j.jmacro.2020.103255

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