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Endogenous Technical Change and Skill Biases in Employment Opportunities

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  • Zon, Adriaan van

    (MERIT)

Abstract

In this paper we present a model that addresses the issue of the uneven distribution ofemployment opportunities over low- and high-skilled workers in a context of skill-biasedendogenous technical change. In our model, technical change consists in part of productinnovation. There is also process innovation to the extent that new products can be producedin two different ways, either using high-skilled workers, or using low-skilled workers afteradapting the production process of a new product. The model combines elements fromKrugman’s (1979) North-South framework, Vernon’s (1966) life-cycle hypothesis andAghion and Howitt’s (1992) work on creative destruction. We show that from a growth pointof view, lowering the relative wages for low-skilled workers does indeed reduceunemployment in the short run, as expected, but it also lowers growth. This is reminiscent ofKleinknecht’s (1998) contention that moderate wage growth makes for slow technical change.

Suggested Citation

  • Zon, Adriaan van, 2000. "Endogenous Technical Change and Skill Biases in Employment Opportunities," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:umamer:2000004
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    1. N/A, 1965. "The United States Electronics Industry in International Trade," National Institute Economic Review, National Institute of Economic and Social Research, vol. 34(1), pages 92-97, November.
    2. Kleinknecht, Alfred, 1998. "Is Labour Market Flexibility Harmful to Innovation?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 22(3), pages 387-396, May.
    3. Muysken, J. & Sanders, M. & Zon, A. Van, 1998. "Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change," Research Memorandum 023, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
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