Skill-Biased Technical Change in U.S. Manufacturing: A General Index Approach

Badi Baltagi and Daniel Rich ()

No 841, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This article applies recent advances in productivity and efficiency measurement to the evaluation of skillbiased technical change. Using the general index approach we are able to establish an explicit and unconstrained time path for nonneutral technical change between production and nonproduction labor in U.S. manufacturing industries over the 1959-1996 period. Our findings confirm the prevailing interpretation in the labor economics literature that substantial reductions in the relative share of production labor are attributable to a sustained period of nonneutral technical change. However, we find that skill-biased technical change effects are most evident prior to 1983. This predates the diffusion of personal computer technologies in the workplace and the dramatic wage structure changes associated with the 1980’s. In contrast to prevailing alternatives, the general index approach also permits us to explain observed shifts in relative labor demand as a combination of price-induced substitution, nonhomothetic output effects and skill-biased technical change responses to a range of proposed elements.

Keywords: wage inequality; skill biased technical change; labor demand; nonneutral technical change; manufacturing; panel data; skill; general index of technical change (search for similar items in EconPapers)
JEL-codes: C33 J23 O33 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2003-08
New Economics Papers: this item is included in nep-lab and nep-lam
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Published - published in: Journal of Econometrics, 2005, 126 (2), 549-570

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Journal Article: Skill-biased technical change in US manufacturing: a general index approach (2005)
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