Skill-biased technological change, endogenous labor supply, and the skill premium

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CEPIE Working Paper ; No. 03/19

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wage Level and Structure; Wage Differentials ; Technological Change: Choices and Consequences; Diffusion Processes ; One, Two, and Multisector Growth Models
• Subject: Skill-Augmenting Technological Change ; Capital-Skill Complementarity ; Skill Premium ; Neoclassical Growth Model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Knoblach, Michael
• Event: Veröffentlichung
• (who): Technische Universität Dresden, Center of Public and International Economics (CEPIE)
• (where): Dresden
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/200194
• URN: urn:nbn:de:bsz:14-qucosa2-344199
• Last update: 10.03.2025, 11:42 AM CET