Working Paper: CEPR ID: DP1434
Authors: Stephen Machin; Annette Ryan; John Van Reenen
Abstract: This paper examines the evidence that rapid upgrading of the skill structure in recent years was driven by technological change. Four countries are examined who have had different wage inequality and unemployment trends ? Denmark, Sweden, the United Kingdom and the United States. The analysis of changes in wage bill shares and employment shares of more skilled workers leads us to the following conclusions: (i) within-industry changes are the driving force of aggregate shifts across all four countries; (ii) there is evidence of skill-biased technical change and capital-skill complementarity in all four countries; (iii) the results are robust to using education instead of occupation as a measure of skill, and computerization instead of R&D as a measure of technology; (iv) in the Anglo-Saxon countries a maximum of one-third of the aggregate change in the skill structure can be accounted for purely by technological factors; (v) the decline of collective bargaining, rather than trade, in the United Kingdom and the United States is an important factor in explaining the changes.
Keywords: employment; skills; technology; R&D
JEL Codes: J51; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological change (O33) | Increased demand for skilled labor within industries (J23) |
| Technological change (O33) | Skill-biased technical change (SBTC) (J24) |
| Technological change (O33) | Capital-skill complementarity (J24) |
| Technological factors (O30) | Aggregate change in skill structure (J24) |
| Decline of collective bargaining (J58) | Changes in skill structure (J24) |
| Labor market institutions + Technological changes (J08) | Influence on skill dynamics (C69) |