Working Paper: CEPR ID: DP8410
Authors: Almut Balleer; Thijs van Rens
Abstract: Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Skill-biased technology shocks have no effect on the relative price of investment, suggesting that capital and skill are not complementary in aggregate production.
Keywords: business cycle; capital-skill complementarity; long-run restrictions; skill premium; skill-biased technology; VAR
JEL Codes: E24; E32; J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| skill-biased technology shocks (J24) | skill premium (J24) |
| skill-biased technology shocks (J24) | total hours worked (J22) |
| skill-biased technology shocks (J24) | demand for skilled labor (J24) |
| skill-biased technology shocks (J24) | relative price of investment goods (E22) |