Why will Technical Change not be Permanently Skill-Biased?
Posted: 7 Mar 2008 Last revised: 11 Dec 2013
Date Written: 2004
We contribute to the debate on skill-biased technical change by studying the long-run dynamics of skill premia in an endogenous growth model in which technical change can be directed towards different factors. We show that R&D resources tend to be directed alternately towards skill-intensive and unskilled-intensive goods, creating cycles in skill premia. If resources were constantly directed towards the same sector, an innovation in a different sector would not be threatened by future innovators. Hence, researchers are incited to switch from one sector to another, in order to avoid the negative effect of innovations constantly occurring in the same sector.
Keywords: Innovation-driven growth, Wage inequality, Skill-biased technical change, Cycles
JEL Classification: J31, O31, O41
Suggested Citation: Suggested Citation