Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence

47 Pages Posted: 10 Jan 2000  

Timothy Bresnahan

Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Lorin M. Hitt

University of Pennsylvania - Operations & Information Management Department

Date Written: May 1999

Abstract

Recently, the relative demand for skilled labor has increased dramatically. We investigate one of the causes, skill-biased technical change. Advances in information technology (IT) are among the most powerful forces bearing on the economy. Employers who use IT often make complementary innovations in their organizations and in the services they offer. Our hypothesis is that these co-inventions by IT users change the mix of skills that employers demand. Specifically, we test the hypothesis that it is a cluster of complementary changes involving IT, workplace organization and services that is the key skill-biased technical change. We examine new firm-level data linking several indicators of IT use, workplace organization, and the demand for skilled labor. In both a short-run factor demand framework and a production function framework, we find evidence for complementarity. IT use is complementary to a new workplace organization which includes broader job responsibilities for line workers, more decentralized decision-making, and more self-managing teams. In turn, both IT and that new organization are complements with worker skill, measured in a variety of ways. Further, the managers in our survey believe that IT increases skill requirements and autonomy among workers in their firms. Taken together, the results highlight the roles of both IT and IT-enabled organizational change as important components of the skill-biased technical change.

Suggested Citation

Bresnahan, Timothy and Brynjolfsson, Erik and Hitt, Lorin M., Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence (May 1999). NBER Working Paper No. w7136. Available at SSRN: https://ssrn.com/abstract=166994

Timothy F. Bresnahan (Contact Author)

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
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Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)

HOME PAGE: http://digital.mit.edu/erik

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lorin M. Hitt

University of Pennsylvania - Operations & Information Management Department ( email )

571 Jon M. Huntsman Hall
Philadelphia, PA 19104
United States
215-898-7730 (Phone)
215-898-3664 (Fax)

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