Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification
80 Pages Posted: 8 Apr 2019
Date Written: April 8, 2019
This paper tries to explain why a certain type of technology is skill-biased. In contrast with existing literature, this paper regards skilled workers as overhead labour, and presents a model wherein skilled workers constitute a fixed input, required to produce a new product. The demand for skill increases with product variety, and information technology is skill-biased because it raises product variety by lowering the fixed cost of product creation. However, skill-biased change does not necessarily raise measured productivity because product diversification reallocates resources into fixed inputs, which is consistent with the historical fact that skill-biased change did not always accompany productivity growth.
Keywords: Skill demand, Product innovation, Inequality, Productivity
JEL Classification: E24, J31, L1, O3, O4
Suggested Citation: Suggested Citation