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Capital-Skill Complementarity in Firms and in the Aggregate Economy

Author

Listed:
  • Giuseppe Berlingieri
  • Filippo Boeri
  • Danial Lashkari
  • Jonathan Vogel

Abstract

We study capital-skill complementarity in a multi-sector framework featuring firm-specific, multi-factor production functions and allowing for firm-specific factor-price wedges. We characterize the elasticity of the skill premium to the price of capital equipment in terms of firm-level elasticities of substitution across factors, elasticities of substitution across firms and sectors, and factor intensities. Using French data, we provide credible identification of these firm-level elasticities. Combining these elements we offer the first identification of aggregate capital-skill complementarity that allows for arbitrary trends in the unobservable skill-bias of productivity at the firm, industry, and aggregate levels. We find an economically and statistically significant degree of aggregate capital-skill complementarity, but this force alone is insufficient to generate the full increase in the relative demand for high-skilled workers observed in the data. There is a substantial role for skill-augmenting technical change not embodied in capital equipment.

Suggested Citation

  • Giuseppe Berlingieri & Filippo Boeri & Danial Lashkari & Jonathan Vogel, 2024. "Capital-Skill Complementarity in Firms and in the Aggregate Economy," NBER Working Papers 33000, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33000
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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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