Cyclical Skill-Biased Technological Change, Almut Ballleer and Thijs van Rens

Cyclical Skill-Biased Technological Change

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 parallel increase in the skill premium and the supply of skilled workers. What are the implications of skill-biased technological change for the business cycle? To answer this question, we use the CPS outgoing rotation groups to construct quarterly series for the price and quantity of skill. 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 premium. Investment-specific technology shocks are not skill-biased and our findings suggest that capital and skill are (mildly) substitutable in aggregate production.

June 2009 [download pdf] - Also available as IZA Discussion Paper 4258.
First draft: February 15, 2008

Thijs van Rens | CREI | Department of Economics and Business | Universitat Pompeu Fabra