When Technology Becomes Too Complicated: Implications of Unbalanced Technical Change
21 Pages Posted: 10 Nov 2018
Date Written: October 18, 2018
This paper examines the impact of unbalanced (skill-biased) technical change on the labor market and economic growth. It argues that when the gap between the technology of skilled and unskilled workers increases, it becomes harder to acquire the skills required to work as a skilled worker; therefore, the economic output is an inverse U-shaped function of the technological gap. In the full model, I endogenize the technical change to reflect the incentives of the inventors. I show that in the long run, the economy converges to a steady state with a balanced growth of the technology of the two groups. The model simultaneously explains several phenomena observed in developed countries over the past few decades, such as an increase in wage inequality, a decrease in low-skilled wages, educational attainment slowdown and a productivity slowdown.
Keywords: Technical Change, Skill Biased, Economic Growth, Endogenous Growth, Productivity Slowdown, Skills, Education
JEL Classification: O33, O14 ,O31, J24, J21, J31 O41
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