Implications of Skill-Biased Technological Change: International Evidence

Abstract

Demand for less skilled workers plummeted in developed countries in the 1980s. In open economies, pervasive skill biased technological change (SBTC) can explain this decline. The more countries experiencing a SBTC the greater its potential to decrease local demands for unskilled labor by increasing the world supply of unskilled-intensive goods. We find strong evidence for pervasive SBTC in developed countries. Most industries increased the proportion of skilled workers despite generally rising or stable relative wages. Moreover, the same manufacturing industries simultaneously increased demand for skills in different countries. Many developing countries also show increased skill premia, a pattern consistent with SBTC.

JEL Classification: F1, J31, O3