Capital-skill complementarity in firms and in the aggregate economy

Giuseppe Berlingieri, Filippo Boeri, Danial Lashkari and Jonathan Vogel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study capital-skill complementarity in a multi-sector framework featuring firm-specific, multi-factor production functions and allowing for firm-specific factor-price wedges. We characterize the elasticity of the skill premium to the price of capital equipment in terms of firm-level elasticities of substitution across factors, elasticities of substitution across firms and sectors, and factor intensities. Using French data, we provide credible identification of these firm-level elasticities. Combining these elements we offer the first identification of aggregate capital-skill complementarity that allows for arbitrary trends in the unobservable skill-bias of productivity at the firm, industry, and aggregate levels. We find an economically and statistically significant degree of aggregate capital-skill complementarity, but this force alone is insufficient to generate the full increase in the relative demand for high-skilled workers observed in the data. There is a substantial role for skill-augmenting technical change not embodied in capital equipment.

Keywords: capital-skill complementarity; capital equipment; income inequality; skill premium; cresh (search for similar items in EconPapers)
JEL-codes: E10 E23 E25 J30 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2024-09-25
New Economics Papers: this item is included in nep-eff
References: Add references at CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/126751/ Open access version. (application/pdf)

Related works:
Working Paper: Capital-skill complementarity in firms and in the aggregate economy (2024)
Working Paper: Capital-Skill Complementarity in Firms and in the Aggregate Economy (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126751

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().