Skill-Biased Technological Change and the Business Cycle

53 Pages Posted: 6 Jun 2011

See all articles by Almut Balleer

Almut Balleer

Stockholm University - Institute for International Economic Studies (IIES)

Thijs van Rens

University of Warwick - Department of Economics; CEPR; Institute for the Study of Labor (IZA)

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

Balleer, Almut and van Rens, Thijs, Skill-Biased Technological Change and the Business Cycle (June 2011). CEPR Discussion Paper No. DP8410, Available at SSRN: https://ssrn.com/abstract=1857360

Almut Balleer

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

Thijs Van Rens

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www.thijsvanrens.com

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/profile?key=3806

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