Information and communication technology diffusion and skill upgrading in Korean industries

Abstract

We examine the relationship between the directly observable indicator of new technology, information and communication technology (ICT) investment intensity, and skill upgrading by analyzing changes in employment and wage structure of 25 Korean industrial sectors over the 1993–1999 period. The estimation results indicate the following implications. First, although ICT expenditure and investment have increased sharply since 1993, it appears that ICT investment has begun to be complementarily combined with skilled labor only since 1996. Second, our results support the ‘limited substitution hypothesis’. ICT has substituted low-skilled non-production workers, whereas the increased demand for high-skilled workers is driven by ICT diffusion in the second sub-period. This asymmetric trend between high-skilled and low-skilled non-production workers in Korea reveals significant differences in comparison with the experiences of other OECD countries. Third, the existence of substitutability between ICT diffusion and low-skilled non-production workers in Korea may cast doubt on the appropriateness of the non-production workers' category, a category regarded as a proxy variable of high-skilled workers in most previous studies.