Technology and the Demand for Skill: An Analysis of Within and Between Firm Differences

43 Pages Posted: 20 Mar 2007

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Julia Lane

Wagner Graduate School of Public Service; Institute for the Study of Labor (IZA)

Kevin L McKinney

University of California, Los Angeles (UCLA)

Lee Kristin Sandusky

U.S. Census Bureau

Multiple version iconThere are 2 versions of this paper

Date Written: March 11, 2007

Abstract

We estimate the effects of technology investments on the demand for skilled workers using longitudinally integrated employer-employee data from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics Program infrastructure files spanning two Economic Censuses (1992 and 1997). We estimate the distribution of human capital and its observable and unobservable components within each business for each year from 1992 to 1997. We measure technology using variables from the Annual Survey of Manufactures and the Business Expenditures Survey (services, wholesale and retail trade), both administered during the 1992 Economic Census. Static and partial adjustment models are fit. There is a strong positive empirical relationship between advanced technology and skill in a cross-sectional analysis of businesses in both sectors. The more comprehensive measures of skill reveal that advanced technology interacts with each component of skill quite differently: firms that use advanced technology are more likely to use high-ability workers, but less likely to use high-experience workers. These results hold even when we control for unobservable heterogeneity by means of a selection correction and by using a partial adjustment specification.

Keywords: technology, demand for skill, matched employer-employee data, older workers

JEL Classification: J21, J23, L23

Suggested Citation

Abowd, John Maron and Haltiwanger, John C. and Lane, Julia and McKinney, Kevin L and Sandusky, Lee Kristin, Technology and the Demand for Skill: An Analysis of Within and Between Firm Differences (March 11, 2007). IZA Discussion Paper No. 2707. Available at SSRN: https://ssrn.com/abstract=970249

John Maron Abowd (Contact Author)

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Julia Lane

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Kevin L McKinney

University of California, Los Angeles (UCLA) ( email )

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Lee Kristin Sandusky

U.S. Census Bureau ( email )

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