Skill-Biased Technological Change and the Business Cycle
53 Pages Posted: 6 Jun 2011
Date Written: June 2011
Abstract
Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Skill-biased technology shocks have no effect on the relative price of investment, suggesting that capital and skill are not complementary in aggregate production.
Keywords: business cycle, capital-skill complementarity, long-run restrictions, skill premium, skill-biased technology, VAR
JEL Classification: E24, E32, J24, J31
Suggested Citation: Suggested Citation
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