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Cyclical Skill-Biased Technological Change

Author

Listed:
  • Thijs van Rens

    (CREI and Universitat Pompeu Fabra)

  • Almut Balleer

    (University of Bonn)

Abstract

Over the past two decades, technological progress has been biased towards making skilled labor more productive. The evidence for this finding is based on the persistent increase in the skill premium, parallel to an upward trend in the supply of skilled workers. What are the cyclical implications of skill-biased improvements in technology? To answer this question, we use the CPS outgoing rotation groups to construct quarterly series for the skill premium and the relative employment of skilled labor. The unconditional correlation of the skill premium with the cycle is zero. However, using a structural VAR with long run restrictions, we find that technology shocks substantially increase the price of skill. However, contrary to the conventional wisdom of capital-skill complementarity, we find that this effect is not driven by investment-specific shocks. Our results also suggest that total employment decreases only in response to skill-biased technology shocks, which we identify using a combination of short run and long run restrictions, and not in response to neutral technology shocks.

Suggested Citation

  • Thijs van Rens & Almut Balleer, 2007. "Cyclical Skill-Biased Technological Change," 2007 Meeting Papers 62, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:62
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    References listed on IDEAS

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    1. Jordi Galí & Pau Rabanal, 2005. "Technology Shocks and Aggregate Fluctuations: How Well Does the Real Business Cycle Model Fit Postwar US Data?," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 225-318, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Cantore, C. & Ferroni, F. & León-Ledesma, M A., 2011. "Interpreting the Hours-Technology time-varying relationship," Working papers 351, Banque de France.
    2. Cantore, Cristiano & Ferroni, Filippo & León-Ledesma, Miguel A., 2017. "The dynamics of hours worked and technology," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 67-82.
    3. Balleer, Almut & Enders, Zeno, 2013. "Expansionary and Contractionary Technology Improvements," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80046, Verein für Socialpolitik / German Economic Association.
    4. Sparber, Chad & Fan, Jasmine Sijie, 2011. "Unemployment, Skills, and the Business Cycle Since 2000," Working Papers 2011-04, Department of Economics, Colgate University, revised 12 Sep 2012.
    5. Almut Balleer, 2012. "New evidence, old puzzles: Technology shocks and labor market dynamics," Quantitative Economics, Econometric Society, vol. 3(3), pages 363-392, November.
    6. Zeno Enders & Almut Balleer, 2012. "Expansionary and Contractionary Technology Shocks," 2012 Meeting Papers 812, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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