Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification

80 Pages Posted: 8 Apr 2019

See all articles by Choong Hyun Nam

Choong Hyun Nam

Economic Research Institute, Bank of Korea

Date Written: April 8, 2019

Abstract

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

Nam, Choong Hyun, Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification (April 8, 2019). Bank of Korea WP 2019-15. Available at SSRN: https://ssrn.com/abstract=3367933 or http://dx.doi.org/10.2139/ssrn.3367933

Choong Hyun Nam (Contact Author)

Economic Research Institute, Bank of Korea ( email )

110, 3-Ga, Namdaemunno, Jung-Gu
Seoul 100-794
Korea, Republic of (South Korea)

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