Skill-biased technological change, endogenous labor supply, and the skill premium
Michael Knoblach ()
No 03/19, CEPIE Working Papers from Technische Universität Dresden, Center of Public and International Economics (CEPIE)
The evolution of the U.S. skill premium over the past century has been characterized by a U-shaped pattern. The previous literature has attributed this observation mainly to the existence of exogenous, unexpected technological shocks or changes in institutional factors. In contrast, this paper demonstrates that a U-shaped evolution of the skill premium can also be obtained using a simple two-sector growth model that comprises both variants of skill-biased technological change (SBTC): technological change (TC) that is favorable to high-skilled labor and capital-skill complementarity (CSC). Within this framework, we derive the conditions necessary to achieve a non-monotonic evolution of relative wages and analyze the dynamics of such a case. We show that in the short run for various parameter constellations an educational, a relative substitutability, and a factor intensity effect can induce a decrease in the skill premium despite moderate growth in the relative productivity of high-skilled labor. In the long run, as the difference in labor productivity increases, the skill premium also rises. To underpin our theoretical results, we conduct a comprehensive simulation study.
Keywords: Skill-Augmenting Technological Change; Capital-Skill Complementarity; Skill Premium; Neoclassical Growth Model (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 O33 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-gro, nep-ino, nep-lma, nep-mac and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:tudcep:0319
Access Statistics for this paper
More papers in CEPIE Working Papers from Technische Universität Dresden, Center of Public and International Economics (CEPIE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().