Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the it Revolution

47 Pages Posted: 25 Sep 2006 Last revised: 20 Mar 2022

See all articles by Paul Beaudry

Paul Beaudry

University of British Columbia (UBC) - Vancouver School of Economics; National Bureau of Economic Research (NBER)

Mark E. Doms

Federal Reserve Bank of San Francisco

Ethan G. Lewis

Dartmouth College - Department of Economics

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Date Written: September 2006

Abstract

This paper focuses on the bi-directional interaction between technology adoption and labor market conditions. We examine cross-city differences in PC-adoption, relative wages, and changes in relative wages over the period 1980-2000 to evaluate whether the patterns conform to the predictions of a neoclassical model of endogenous technology adoption. Our approach melds the literature on the effect of the relative supply of skilled labor on technology adoption to the often distinct literature on how technological change influences the relative demand for skilled labor. Our results support the idea that differences in technology use across cities and its effects on wages reflect an equilibrium response to local factor supply conditions. The model and data suggest that cities initially endowed with relatively abundant and cheap skilled labor adopted PCs more aggressively than cities with relatively expensive skilled labor, causing returns to skill to increase most in cities that adopted PCs most intensively. Our findings indicate that neo-classical models of endogenous technology adoption can be very useful for understanding where technological change arises and how it affects markets.

Suggested Citation

Beaudry, Paul and Doms, Mark E. and Lewis, Ethan G., Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the it Revolution (September 2006). NBER Working Paper No. w12521, Available at SSRN: https://ssrn.com/abstract=931369

Paul Beaudry (Contact Author)

University of British Columbia (UBC) - Vancouver School of Economics ( email )

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Vancouver, British Columbia V6T 1Z1
Canada

National Bureau of Economic Research (NBER)

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Mark E. Doms

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Ethan G. Lewis

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States

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