Working Paper: NBER ID: w21165
Authors: Francisco J. Buera; Joseph P. Kaboski; Richard Rogerson
Abstract: We document for a broad panel of advanced economies that increases in GDP per capita are associated with a shift in the composition of value added to sectors that are intensive in high-skill labor. It follows that further development in these economies leads to an increase in the relative demand for skilled labor. We develop a two-sector model of this process and use it to assess the contribution of this process of skill-biased structural change to the rise of the skill premium in the US, and a broad panel of advanced economies, over the period 1977 to 2005. We find that these compositional demands account for between 25 and 30% of the overall increase of the skill premium due to technical change.
Keywords: Skill-biased structural change; Skill premium; Economic development; Labor economics
JEL Codes: E02; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GDP per capita (O49) | demand for high-skill labor (J24) |
| GDP per capita (O49) | shift in value added towards high-skill intensive sectors (J24) |
| skill-biased structural change (F66) | increase in skill premium (J24) |
| technical change (O39) | increase in skill premium (J24) |
| compositional changes (L16) | rise in skill premium (J24) |