Economics
Skill Biased Technological change
Skill-biased technological change refers to the phenomenon where technological advancements disproportionately benefit individuals with higher skill levels, leading to increased demand for skilled workers and higher wages for those workers. This can result in greater income inequality as the gap between skilled and unskilled workers widens.
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11 Key excerpts on "Skill Biased Technological change"
eBook - PDF- Claudia Goldin, Lawrence F. Katz, Claudia Dale Goldin(Authors)
- 2009(Publication Date)
- Belknap Press(Publisher)
The empirical and logical case for skill-biased technological change, as a substantial source of demand shifts favoring more-educated workers since 1980, would appear very strong. But that does not neces-sarily mean that the driving force behind rising wage inequality since 1980 was an alteration in the type or a quickening in the rate of techno-logical change. The reason, we will soon demonstrate, is that capital-skill complementarity was present throughout the twentieth century as was rapid skill-biased technological change. These effects of technolog-ical change occurred even during periods of declining or stable educa-tional wage differentials and narrowing economic inequality. The evidence that skill-biased technological change has been on-going for at least the last half century begins with a pioneering article by Zvi Griliches (1969), who found a substantial degree of capital-skill complementarity in U.S. manufacturing during the 1950s. Other re-searchers following Griliches’ path documented strong within-sector skill upgrading, even in the face of rising educational wage differentials during the 1950s and 1960s, and a strong positive correlation of in-dustry skill demand with capital intensity and technology investments throughout the 1950s to the 1970s. 16 Technology Was Not Acting Alone: The Role of the Supply of Skills Rapid skill-biased technological change has been in operation almost continuously for the past half century or more; however, for the period since 1980, an additional factor must be considered. The relative wages of more-educated workers increased sharply and the relative quantities of skill increased. There are two chief ways to explain this, but only one Skill-Biased Technological Change 99
eBook - PDFDemanding Work
The Paradox of Job Quality in the Affluent Economy
- Francis Green(Author)
- 2013(Publication Date)
- Princeton University Press(Publisher)
It was supposed that technological change was “skill-biased”—that is, leading to decreases in the relative demand for low-skilled labor com- pared with the demand for high-skilled labor. The proposition was that an acceleration of the demand for skilled labor, brought on by the spurt of technological progress, had led to long periods of demand exceeding the supply of skilled labor, which was expanding at a more modest and steady rate. 3 The knowledge economy paradigm has become the embodiment of this same thesis for the present day. With it comes as well the focus on new management skills needed to coordinate the process of seeking competi- tive advantage through knowledge management. These management skills are said to develop alongside teamwork skills, and it is argued to be a requirement that greater proportions of the workforce are empow- ered to become managers of their own work schedules, that traditional hierarchies are being and should be “de-layered,” and that there is and should be a greater reliance on trust in the workplace. Here is one place where the more abstruse outpourings of theorists ride on the same tracks as a significant strand of the popular management literature to be found in airport lounges. Just as the direction of change of skill remained a subject of sharp con- troversy among sociologists for many years, there is as yet no consensus of opinion among economists as to whether skill-biased technological change is the best explanation for increasing wage inequality. Nor is there any explicit evidence that there was an acceleration of the demand for skills in recent decades. Nevertheless, it is widely held among economists that the direction of skill change is upward, and that this process is linked W O R K L I F E I N T H E “ K N O W L E D G E E C O N O M Y ” 27
No longer available |Learn moreWorld Social Report 2020
Inequality in a Rapidly Changing World
- Department of Economic and Social Affairs(Author)
- 2020(Publication Date)
- United Nations Publications(Publisher)
The use of labour-saving technologies affects the share of national income that goes to workers. Skill-biased technologies affect the composition of the labour force as well as the income that goes to workers with different skills. Skill bias comes into play with the technologies invented and diffused after World War II in developed countries, and their use has accelerated over the last three decades. 42 Technological change in developed countries has been identified as skill biased. The wages of highly skilled workers – relative to those of low-skilled workers – have indeed been rising in the last decades, even while the supply of highly skilled (educated) workers has increased. All other things being equal, overall increases in education should reduce the impact of the “skill premium”. Technological change has been recognized as an important factor in the rising skill premium (see figure 2.2). THE EMERGENCE OF NEW TECHNOLOGIES IS CHANGING THE NATURE OF WORK 42 Historically, technologies have not been always skill biased. For example, interchangeable parts, a major technological advance in the nineteenth century in the United Kingdom, were designed to replace skilled workers (artisans) with weaving, spinning and threshing machines. The technologies were considered unskill biased (see Acemoğlu, 2003). WORLD SOCIAL REPORT 2020 62 2. Share of labour in national income: impacts of labour-saving technology Labour-saving technologies have been identified as one of the drivers of the declining income share of labour in both developed and developing countries (IMF, 2017a). Chapter 1 shows that the share of national income that goes to labour has declined in both developing and developed regions. Karabarbounis and Neiman (2013) estimate that the emergence of new technologies, particularly those related to ICTs, accounted for about half of the decline in the global labour share of income for 1975-2012.
eBook - PDFKnowledge, Information, and Expectations in Modern Macroeconomics
In Honor of Edmund S. Phelps
- Philippe Aghion, Roman Frydman, Joseph E. Stiglitz, Michael Woodford, Philippe Aghion, Roman Frydman, Joseph E. Stiglitz, Michael Woodford(Authors)
- 2021(Publication Date)
- Princeton University Press(Publisher)
2. For example, Freeman (1993) showed that the standard deviation of within-firm log wages in the United States was 25% lower in unionized firms compared to nonunionized firms. 3. For example, Card (1996). 4. Although deunionization (organizational change) and trade liberalization do not fully explain the recent evolution in wage inequality, nevertheless we believe that these factors can become more significant when analyzed in relation to skill-biased technical change (see, e.g., Aghion et al., 2001, on deunionization and skill-biased technical change and Acemoglu, 1999, on trade liberalization and skill-biased technical change). 446 PHILIPPE AGHION ET AL. 2.3. Technology A number of empirical studies have pointed to a significant impact of skill-biased technical change (SBTC) on the evolution of wage inequality. For example, using R&D expenditures and computer purchases as measures of technical progress, Berman et al. (1994) found that these two factors could account for as much as 70 percent of the move away from production to nonproduction labor over the period 1979–1987. Murphy and Welch (1992) find that the share of college labor has increased substantially in all sectors since the mid-1970s, which, together with the observed increase in the college premium, provides further evidence of skill-biased technical change. More recently, based on the data reported in Autor et al. (1998) and assuming an elasticity of substitution of 1.4 between skilled and unskilled labor,Acemoglu (2000) estimates that the relative productivity of college graduates increased from 0.157 in 1980 up to 0.470 in 1990 (whereas this relative productivity had risen at a lower rate prior to the early 1980s). Krusell et al. (2000) argued that skill-biased technical change can be interpreted as an increased growth in the stock of capital equipment since capital and skills are complementary in the aggregate production function.
eBook - PDF- Solomon W. Polachek, Konstantinos Tatsiramos, Konstantinos Tatsiramos, Solomon W. Polachek(Authors)
- 2012(Publication Date)
- Emerald Group Publishing Limited(Publisher)
Several explanations are possible for this shift in the demand and the first that has been brought forth is related to technological progress. According to this view, the introduction of new technologies increases the demand for workers that have the skills to use them so that skilled workers become relatively more demanded than the rest. In particular, a number of studies provided evidence that skilled workers benefit relatively more than LORENZO CORSINI 2 unskilled ones from technological progress: this phenomenon has been called skill-biased technological change (SBTC). This is the conclusion that Katz and Murphy (1992) reach in their analysis for US, and several other papers have confirmed the presence of SBTC: Acemoglu (1998) is parti-cularly relevant, trying to endogenize SBTC, while Beaudry and Green (2005) update the analysis of Katz and Murphy (1992) with more recent data. A smaller number of papers have appeared covering cross countries evidence: studies by Berman, Bound, and Machin (1998) and Machin and Van Reenen (1998) tackle the consequences of technological change exami-ning wage inequalities in a larger group of countries but do not use exact measures of wage differentials between skilled and unskilled workers. More complex relationships between technology adoption and labour demand have also been proposed. In particular, Autor, Levy, and Murnane (2003) suggest that jobs that require routine tasks, mostly found in middle wages clerical occupations, are being substituted by new technological devices, so that there is a downward pressure on wages for this kind of jobs. On similar lines, Manning (2004) argues that since wages at the bottom of the distribution are related to manual but non-routine jobs, they might not experience a decrease due to technological progress.
eBook - PDFEntrepreneurship and Global Competitiveness in Regional Economies
Determinants and Policy Implications
- Sherry Hoskinson, Gary D. Libecap, Sherry Hoskinson, Gary D. Libecap(Authors)
- 2011(Publication Date)
- Emerald Group Publishing Limited(Publisher)
More specifically, the localized technological change approach seems able to explain the bias in favor of higher levels of skill intensity as the result of an induced technological change constrained by the irreversibility and consequent large switching costs of firms with high levels of fixed and human capital intensity. The skill-intensive direction of technological change is the result of the efforts of large firms with high unit wages, able to command the generation and exploitation of technological change, to cope with the increase of the relative levels of wages of unskilled labor and competition in traditional product markets brought about the rapid increase in the integration of international product markets. ACKNOWLEDGMENT The authors acknowledge the financial support of the European Union D.G. Research with the grant number 266959 to the research project ‘‘Policy CRISTIANO ANTONELLI AND ALESSANDRA COLOMBELLI 16 Incentives for the Creation of Knowledge: Methods and Evidence’’ (PICK-ME), within the context of the Cooperation Program/Theme 8/Socio-economic Sciences and Humanities (SSH), and of the research project IPER in progress at the Collegio Carlo Alberto. REFERENCES Acemoglu, D. (1998). Why do new technologies complement skills? Directed technological change and wage inequality. Quarterly Journal of Economics , 113 , 1055–1089. Acemoglu, D., & Zilibotti, F. (2001). Productivity differences. Quarterly Journal of Economics , 116 , 563–606. Acs, Z. J., & Audretsch, D. B. (1988). Innovation in large and small firms: An empirical analysis. American Economic Review , 78 , 678–690. Acs, Z. J., & Audretsch, D. B. (1990). Innovation and small firms . Cambridge, MA: MIT Press. Antonelli, C. (2003). The economics of innovation, new technologies and structural change . London: Routledge. Antonelli, C. (2008). Localized technological change. Towards the economics of complexity . London: Routledge.
eBook - PDFWhen Growth Is Not Enough
Explaining the Rigidity of Poverty in the Dominican Republic
- Francisco Galrao Carneiro, Sophie Sirtaine(Authors)
- 2017(Publication Date)
- World Bank(Publisher)
Intuitively, biased technical change refers to changes in the relative factor productivity that affect the relative demand for productive factors and their income distribution. Specifically, if technology increases the productivity of capital disproportionately, given the level of substitution between factors, it would be optimal to reduce demand for labor and to increase it for capital. This change reduces the labor income share, the share of total output allocated to worker compensation—and finally, the income growth of households with low capital. As such, biased tech-nical change has implications both for poverty reduction and income inequality. In this chapter, the recent evolution of the labor income share in the Dominican Republic is analyzed to test whether biased technical change can help explain why strong economic growth has not translated into improved labor market outcomes. More specifically, the analysis focuses on whether wage stagnation—in the context of favorable economic growth—is explained by a decrease in labor income shares. If, indeed, capital-biased technical change is a determining factor, then sectors that experienced higher output growth also experienced a decrease in the labor income share. In the context of the classical growth model, technical change is represented by the coefficients interacting with productive factors. Understanding these tech-nical coefficients gives important insights into the transformation of an economy over time. In fact, the labor income share summarizes the production structures and technological conditions of sectors—such that variations reflect changes either in the sectoral composition of output or in the structure of factor utiliza-tion (Kravis 1962). While for many years, the constancy of the labor share was a reasonable approximation for the data, at the global level, this indicator has shown a steady decline over the past three decades.
- Horst Ellermann, Peter Kreutter, Wolfgang Messner, Horst Ellermann, Peter Kreutter, Wolfgang Messner(Authors)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
They conclude a dominant role of digitalization-driven SBTC for the observable continuous shift in the demand for high-skilled workers that is still ongoing, although relative wages for those groups are rising. Furthermore, Acemoglu (2002) highlights sharply rising returns to schooling during the past three decades despite an infrequent rapid increase in the supply of educated workers. More interestingly, a relevant meaning of the aforementioned globalization impact would not inevitably con- tradict the hypothesis of the prevailing role of digitalization. Offshoring is, at least in part, indirectly related to advances in computing and communication technology (partially as, e.g., man-made trade barriers might also account for 5 The Effect of Digitalization on the Labor Market 117 a substantial share). New technologies allow for the lifting of the geographical proximity of activities that formerly had to be provided close to the customer. Following Acemoglu and Autor (2011, p. 1045), these tasks can therefore be outsourced which generates additional pressure on the domestic labor market. Consistently, Katz and Autor (1999, p. 1534) point out “that increased com- puter intensity is associated with increased employment shares of managers, professionals and other highly educated workers, and with decreased employ- ment shares of clericals, production workers, and less educated workers”. But facing a SBTC that increases the marginal product of skilled labor to a higher extent than for the unskilled, one would expect a monotonous shift in the skill level that is required by workers throughout all lower and middle- skill levels, see for instance Card and DiNardo (2002). An m is provided by Acemoglu (1999). He emphasizes that the increase was a result of the shift in the supply of college workers in the 1970s. Reacting to such an environment, firms start to specifically design jobs for high-skilled workers if they become more abundant.
eBook - PDFGrowth and Distribution
Second Edition
- Duncan K. Foley, Thomas R. Michl, Daniele Tavani(Authors)
- 2019(Publication Date)
- Harvard University Press(Publisher)
We have assumed that technical changes are viable or that π < ω , but it is clear that as the profit share rises in order to maintain full employment, at some point it will equal the viability threshold parameter, ω . At this point, the wage will correspond to the wage at the switchpoint. If the profit share rises beyond this point, the new techniques will not be immediately viable. In order to model this growth regime, we would need to specify how unused techniques are processed by entrepreneurs. In Chapter 10, we study the neo-classical growth model, which assumes a smooth production function with many techniques that are not viable at the prevailing wage. 8.5 Reverse Marx-Biased Technical Change The process of industrialization and growth has historically been accompa-nied by capital-using, labor-saving patterns of technical change. As we saw in Chapter 2, this was true almost universally for the currently advanced countries when they were developing. Yet in the last decades of the twentieth century some economies have exhibited signs of the polar opposite pattern— labor-using capital-saving technical change, which we will call reverse Marx-biased technical change or RMBTC. A closer look at the EPWT 6.0 data for subperiods 1967–1985 and 1986– 2014 (Figures 8.4–8.8) reveals different patterns of technical change for the world economy as a whole, for the advanced capitalist regions of the world, for the rapidly growing economies of South and East Asia, on the one hand, and for the “global South,” Central and South America, Africa, the Middle East, and Central Asia, on the other. The world economy as a whole exhibits mostly Marx-biased technical change in the earlier period, which drifts toward a pattern of Hicks-neutral technical change in which both capital and labor inputs become more pro-ductive. There is no evidence of RMBTC at the world level. The data tell a somewhat different story for the various regions that make up the world economy.
eBook - ePub- Orley Ashenfelter, David Card(Authors)
- 2010(Publication Date)
- North Holland(Publisher)
2002b) generalize for factor-augmenting technical change in this task-based environment.73 The qualifier “absolutely” is introduced, since in Acemoglu (1998, 2002b) , bias refers to changes in technologies affecting relative prices, whereas in this more general framework, the focus is on the price level of a factor. To obtain sharp results on relative price changes, one needs to restrict the focus to factor-augmenting changes (see Acemoglu (2007)) . In what follows, all of the references to biased technical change refer to factor price levels, and thus one could insert the qualifier “absolute” though we will not do so as to simplify terminology.74 When θ is a continuous multidimensional variable (a vector), there is a straightforward generalization of this definition (see Acemoglu (2007)) . All of the results we discuss here are valid in this general case, but to simplify the exposition, we will not introduce the necessary notation.75 Recall in particular from Proposition 2 that dIH/d lnAH< 0 and d ln (wH/wM) /d lnAH> 0, and thuswM/wHwill fall.76 Nor is this notion far-fetched. Skill levels in production and clerical occupations, as measured by the college employment or wage-bill share, have risen as employment in these occupations has declined (Autor et al., 1998
- Jonas Ljungberg(Author)
- 2004(Publication Date)
- Palgrave Macmillan(Publisher)
The latter require a specific set of skills, whereas the former might be less skilled or unskilled. To delve further into this issue, it is necessary to redefine the problem. First, it is difficult to escape the fact that technological development is based on the progress of knowledge. Second, the greater the division of labour, the more diversified the demand for skills will be. Knowledge is a broad concept that comprises science and technology as well as skills, the latter denoting hands-on or practical capability. Rosenberg (1994, p. 28) has drawn attention to the explanation of the role of skills by Charles Babbage, who was Marx’s precursor on the question of technology, in a treatise published in 1833. Babbage’s point was that the division of labour did not simply mean that Jonas Ljungberg 3 the production process was chopped up into a series of trivial moments, resulting in greater output. The economy of the division of labour is that the diverse moments of the production process are performed by workers with no more skills than necessary. In this system, the skilled worker or the engineer is only paid for work that requires certain skills, and is not assigned unskilled work (1833, pp. 175–6). 3 Babbage also raised the issue of the effects of machinery on employment, and not only as far as unskilled or raw labour was concerned. His discussion remains a relevant research plan as regards substitutability versus comple- mentarity between technology and skills: the circumstance of our not possessing the data necessary for the full examination of so important a subject, supplies an additional reason for impressing, upon the minds of all who are interested in such inquiries, the importance of procuring accurate registries, at various times, of the number of persons employed in particular branches of manufacture, of the number of machines used by them, and of the wages they receive.
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