Skill-biased Technological Change Hypothesis Research Articles

The sources and structure of wage inequality changes in the selected Central-Eastern European Countries

AbstractWe study the determinants of wage inequality and its fluctuations in six Central-Eastern European nations using European Union Statistics on Income and Living Conditions microdata from 2010 to 2019. Wage disparity in these countries changed in distinct ways. Inequality in Czechia and Romania is generally steady, has fallen consistently in Poland and Slovakia, and has increased in Bulgaria. Inequality has been steadily reducing in Hungary but has recently increased significantly. Therefore, this paper questions these countries' primary causes of wage inequality changes. In addition to providing a detailed description of inequality trends in these countries, we focus on examining the demographic and micro-level determinants alongside the minimum wage changes. We estimate these effects using RIF regression and RIF decompositions for various inequality measures. The changes in wage inequality in these countries were driven mainly by wage structure effects regardless of the increase or decrease in wage inequality. Changes in the returns to education and returns to permanent employment contracts are crucial in explaining decreased wage inequality. The increases in wage inequality in Hungary and Bulgaria are defined mainly by the changes in the estimated constants instead of micro-level determinants. The changes in the minimum wage explain most of the unknown factors in Bulgaria, and the spillover effects of the minimum wage may explain most of the unknown factors in Hungary. Our results can support the skill-biased technological change hypothesis in the case of Slovakia, Romania, Czechia, and Bulgaria.

Does ICT diffusion validate skill-biased technological change hypothesis? Evidence from the post-Soviet countries

This study scrutinizes the impact of ICT diffusion on decomposed measures of income inequality in post-Soviet countries. We apply the Cross-Sectional Autoregressive Distributed Lags (CS-ARDL) approach to examine the dynamics of our panel time series data from 1991 to 2019. Empirical evidence suggests that ICT diffusion is negatively associated with the income of the top segments (the top 1 % and 10 %) of the population in the long term, while its impact is insignificant in the short term. Moreover, the ICT diffusion de facto (policy-implementation spectrum) primarily promotes the income share of the bottom class, probably by providing new market opportunities. The spread of ICT, in terms of policy decisions, leads to a notable decrease in the income proportion held by the top 10 % of earners, exhibiting the most significant level of responsiveness. Furthermore, our findings infer that government expenditure can also play a crucial role in reducing income inequality by decreasing the income portion of the top segment. The implications of our findings have direct relevance for policymakers in formulating effective strategies regarding ICT diffusion-income inequality nexus.

Jacob Mincer Award

Previous articleNext article FreeJacob Mincer AwardPDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreLawrence F. Katz is the 2022 recipient of the Jacob Mincer Award for lifetime contributions to the field of labor economics. Katz graduated from Berkeley in 1981 and earned his PhD in economics from the Massachusetts Institute of Technology in 1985. He returned to Berkeley as an assistant professor and joined the economics faculty of Harvard University after one year, where he is currently the Elisabeth Allison Professor of Economics. He is a Society of Labor Economists (SOLE) fellow (elected 2005), a past SOLE president (2013–14), a research associate of the National Bureau of Economic Research, a fellow of the Econometric Society and the American Academy of Arts and Sciences, a member of the US National Academy of Sciences, and a research fellow at the Institute of Labor Economics (IZA). Katz was chief economist of the US Department of Labor and has served on the advisory boards of several important institutions.Katz’s most influential research studies the evolution of wage inequality in advanced countries. He focuses on the fundamental role of technological change and education. His 1992 Quarterly Journal of Economics paper with Murphy developed the “canonical framework,” a simple model expressing the educational wage premium as reflecting observable shifts in educational supply and a residual technical change term. He found that although increases in the supply of skilled workers reduce inequality, technology often favors more skilled workers, increasing inequality. With Autor and Krueger, he found that increases in observable technology indicators, such as computer usage and R&D, increase skill demand, further bolstering the skill-biased technological change hypothesis. Researchers have adopted these methods to analyze changing inequality in many countries.His authoritative book with Claudia Goldin, The Race between Education and Technology (2008), examines how the growth of educational institutions contained inequality for most of the twentieth century. The slowdown in educational attainment for cohorts entering the labor market after roughly 1980 increased the return to schooling in the last quarter of the century.With Autor and Kearney (American Economic Review, 2006; Review of Economics and Statistics, 2008), Katz argues for a more nuanced role of technology. Digital technologies tend to replace routine tasks performed by occupations in the middle of the wage distribution, where wages and employment fell noticeably from the 1990s, compared with both the top and the bottom of the earnings distribution. European studies replicate this “hollowing out” of “middle jobs.” His recent work shows that the growth of large “superstar firms” with low labor shares and high profit margins explains the decline in labor’s share of gross domestic product (Quarterly Journal of Economics, 2020). Again, he links this to changes in the fundamental nature of technologies.Other work demonstrates the importance of place. With Kling and Liebman (Econometrica, 2007; Quarterly Journal of Economics, 2001), he demonstrated that although changing neighborhoods did not raise adults’ earnings, it substantially improved their mental health. With Chetty and Hendren (American Economic Review, 2016), he found that better neighborhoods helped the future labor market outcomes of younger children.In sum, Lawrence Katz is an extraordinarily productive scholar who has changed the face of social science. His work is marked by an intense empirical seriousness and a strong focus on policy. His research seeks to change the world, not just to interpret it.Beyond his research contributions, Katz has provided distinguished service to the profession as editor of the Quarterly Journal of Economics for the past 30 years. Under his leadership, it has become the most widely cited economics journal. His success in reducing review times at that publication has set the standard for other top journals in economics. He is renowned for his generous mentorship of junior scholars and his decency and respect in dealing with other economists. Previous articleNext article DetailsFiguresReferencesCited by Journal of Labor Economics Volume 40, Number 3July 2022 Published for the Society of Labor Economists, Economics Research Center/ NORC Article DOIhttps://doi.org/10.1086/721002 Views: 571Total views on this site © 2022 The University of Chicago. All rights reserved.PDF download Crossref reports no articles citing this article.

Technology implementation within enterprises and job ending among employees. A study of the role of educational attainment, organizational tenure, age and unionization

This study examines how technology implementation within workplaces impacts job ending among employees. We advance the literature on the labor market consequences of new technologies by focusing on their impact within workplaces where they are implemented, rather than inferring from aggregate labor structural changes. We also address how the impact of technology differs depending on workers education, organizational tenure and age. Using large-scale Dutch matched employer-employee panel data directly measuring technology implementation, we find that technology implementation is associated with an overall decrease in the probability of job ending. In line with the skill biased technological change hypothesis, higher educational attainment is associated with lower probabilities of job ending. Furthermore, we find older workers (around 50+) and workers with longer organizational tenure (around 12+ years) to have a higher probability of job ending when technology is implemented. Finally, we do not find the effects of technology implementation to differ depending on the union density of the industry in which an enterprise operates.

Social Class, Work-Related Incomes, and Socio-Economic Polarization in Europe, 2005–2014

AbstractSociologists and economists have typically focused on different dimensions of socio-economic inequalities. Sociologists have been mainly concerned with occupational and educational indicators, whereas economists have focused on the earnings, income, and wealth distribution. The article integrates sociological and economics’ approaches to the study of socio-economic inequalities, by providing an analysis of the relationship between social class and work-related income, and its distribution, in Europe in the period between 2005 and 2014. Europe as a whole and its eight major countries are studied with the European Union Statistics on Income and Living Conditions (EU-Silc) data. Changes in the income hierarchy among classes are discussed in the framework of the occupational upgrading and polarization hypotheses. The results of our analyses suggest that, first, the capacity of the concept of social class to describe and summarize the different distribution of individual market-related income is stable or increasing in Europe. Second, in the 10 years considered there has been a ‘fanning out’ of the class income hierarchy. With reference to upper social class, the increase in the income gap has been stronger for the self-employed and the routine workers. Finally, there is also evidence of a mix of occupational upgrading and polarization. The empirical results, in particular, are consistent with the predictions of the skill-biased technological change hypothesis.

Structural Change and Wage Inequality in the Manufacturing Sector: Long Run Evidence from East Asia

This paper analyses the long run determinants of wage inequality in the manufacturing sector for a group of East Asian countries that have experienced rapid structural transformations in recent decades. In line with the skill biased technological change hypothesis, our results show that within manufacturing structural change which fosters the participation of higher skilled workers is a strong determinant of the wage premium. However, the paper also highlights an unusual feature of the East Asian model, showing how well-designed education policies, prudent macroeconomic management and selective policies towards foreign capital can help to buffer the pressure of structural change on wage inequality, even in an open economy context.

Skill-Biased Technological Change Hypothesis with Different Market Structures: The Case of Turkish Manufacturing Industries

The purpose of this study is to investigate the skill biased technological change (SBTC) hypothesis using 1985-2001 data from Turkish manufacturing industries. The role of market structure in this process will also be explored. Market structure will be proxied by concentration ratios in industries. This paper contributes to the literature in two different ways. Firstly, this is the first study to empirically test SBTC hypothesis for Turkey. Secondly, and more important is to incorporate market structure into the investigation of the SBTC hypothesis. The results from this study are as follows: (i) wage differentials have a positive and significant effect on productivity; (ii) this effect does not differ importantly between low and high concentration ratios.

Measuring Skill Intensity of Occupations with Imperfect Substitutability Across Skill Types

In absence of a model-based measure of occupational skill-intensity, the literature on wage inequality cannot consistently track technological progress on occupational level – a key ingredient of recent theories of labor market polarization. In this paper, I use the March CPS data from 1983 to 2002 to estimate such a measure corresponding to occupation-specific relative productivities of college and high-school educated. With imperfect substitution across skill types, the measurement of relative productivities requires estimation of substitution elasticities, and I propose a simple strategy to obtain these. The resulting measure is used to shed light on the modified skill-biased technological change hypothesis proposed by Autor et. al. (2006).

The Impact of ICT Investments on the Relative Demand for High-, Medium-, and Low-Skilled Workers: Industry Versus Country Analysis

In this paper I analyze the impact of investments into information and communication technology (ICT) on relative compensation shares of high-, medium-, and low-skilled workers. Next to investigating the influence of ICT in 14 countries, I explore this impact for 23 industries. I find that the skill-biased technological change hypothesis is rejected if single countries are analyzed with an industry panel, while ICT investments influence relative compensation shares in single industries. There is a positive impact of ICT on high-skilled workers' relative compensation for the time before 1995, while medium- and low-skilled workers' compensation shares are aff ected especially since 1995.

Trade policy and wage inequality: evidence from Indian manufacturing

PurposeThere has been a period of slow but a steady increase in wage inequality in the Indian manufacturing sector since the mid‐1980s, which has gone hand‐in‐hand with an increase in the relative employment of skilled workers across all industries in the same period. The purpose of this paper is to investigate whether the co‐movement of relative employment and wages of skilled workers can be attributed to the changes in trade policy that has occurred in the Indian economy since the mid‐1980s.Design/methodology/approachThe two dominant theoretical perspectives on why trade reforms lay lead to wage inequality are Heckscher–Ohlin theory and trade‐induced skill‐biased technological change (SBTC). The paper evaluates the applicability of these theoretical perspectives to the Indian case using disaggregated industry data from Annual Survey of Industries from 1973 to 1997.FindingsEvidence was found of the validity of both the two dominant theoretical perspectives on wage inequality to explain the co‐movement in wage inequality and relative skill intensity in Indian manufacturing, with both variables increasing in the 1990s. Trade‐induced technological progress has led to an increase in relative skill intensity and wage inequality within industries. At the same time, the decline in protection that seems to have occurred more in unskilled labour‐intensive industries has led to a relative fall in the economy‐wide return to unskilled labour relative to skilled labour. Therefore, trade reforms have led to a widening of wage gap between skilled and unskilled workers, and an increase in relative skill intensity in Indian manufacturing.Originality/valueThe paper contributes to support of the trade‐induced SBTC hypothesis which may provide a consistent explanation of why many countries in the south experienced increases in wage inequality with the onset of trade liberalisation.

Study on Factors Determining Labor Force Participation Rate of Older males : The Elderly Poverty Labor Hypothesis and Skill-Biased Technological Change Hypothesis

Study on Factors Determining Labor Force Participation Rate of Older males : The Elderly Poverty Labor Hypothesis and Skill-Biased Technological Change Hypothesis

Long-Run Changes in the Wage Structure: Narrowing, Widening, Polarizing

Long-Run Changes in the Wage Structure:Narrowing, Widening, Polarizing Claudia Goldin and Lawrence F. Katz From the close of World War II to 1970—the year the Brookings Papers on Economic Activity commenced publication—America enjoyed widespread prosperity. Not only did the national economy grow rapidly, driven by robust productivity growth, but all parts of the income distribution expanded at fairly similar rates. America was "growing together." But in the mid-1970s economic growth slowed. By the early 1980s the wage structure had begun a period of widening that has lasted until the present day. Even though productivity growth surged again starting in the mid-1990s, the benefits of economic growth have been concentrated at the top end of the distribution.1 America has been "growing apart." These "growing together" and "growing apart" patterns are evident in figure 1, which compares real income growth across the family income distribution for the postwar period before 1973 with that after 1973. Before 1973, real income growth was a bit faster near the bottom of the distribution and somewhat slower near the top, making the changes modestly equalizing. In sharp contrast, from 1973 to 2005 family incomes virtually stagnated for the lowest quintile but grew more than three times as rapidly for the top 5 percent as for the middle quintile. [End Page 135] Click for larger view View full resolution Figure 1. Growth in Real Mean Family Income by Income Quintile, 1947-73 and 1973-2005a Since most Americans make their living from work, it should not come as a surprise that changes in the labor market and the distribution of wages have been the driving force behind the rising disparity in the economic fortunes of American families.2 In this paper we document the nature of rising U.S. wage inequality since 1980 and place the recent changes within a century-long historical perspective to understand the sources of change. The widening of the wage structure that began in the early 1980s differed markedly from the wage structure changes of the early to mid-twentieth century. The wage structure narrowed substantially during the first half of the twentieth century and was relatively stable during the 1950s and 1960s. The spreading out of the wage structure since 1980 occurred in two stages. From 1980 to around 1987, wage inequality increased in a rapid and monotonic fashion: wages at the top grew most rapidly, those in the [End Page 136] middle less rapidly, and those at the bottom the least of all. Since the late 1980s, wages at the upper end of the distribution have continued to grow rapidly relative to the middle, but the lower end has not lost out relative to the middle. These recent wage structure changes have been associated with a polarization of the labor market, with employment shifting into high-and low-wage jobs at the expense of middle-wage positions.3 Why has the wage structure widened so much since 1980? A popular explanation attributes the primary role to an increase in the rate of growth in relative demand for more-skilled workers, due to skill-biased technological change and a reorganization of work driven by the spread of computer-based technologies.4 Globalization pressures, eroding labor market institutions, and changes in the social norms that constrain pay disparities have also been offered as explanations, and each appears to have played some role.5 Our focus is on reassessing the skill-biased technological change hypothesis in a long-run historical context. Skill-biased technological change is not a new phenomenon. Rather, it has driven rapid secular growth in the relative demand for more-educated workers for at least a century. During most of the twentieth century, the narrowing of the wage structure came about largely because the supply of skills grew faster than did the demand for skills. Growth in the relative demand for skills was produced largely by skill-biased technological change. Growth in the supply of skills was due primarily to the rising educational attainment of successive cohorts. That, in turn, was fueled by increased access to public high schools and later to colleges and universities. The upshot of these changes was that...

Labor Supply and Personal Computer Adoption

The positive correlations found between computer use and human capital are often interpreted as evidence that the adoption of computers have raised the relative demand for skilled labor, the widely touted skill-biased technological change hypothesis. However, several models argue the skill-intensity of technology is endogenously determined by the relative supply of skilled labor. We use instruments for the supply of human capital coupled with a rich dataset on computer usage by businesses to show that the supply of human capital is an important determinant of the adoption of personal computers. Our results suggest that great caution must be exercised in placing economic interpretations on the correlations often found between technology and human capital.

Labor Supply and Personal Computer Adoption

The positive correlations found between computer use and human capital are often interpreted as evidence that the adoption of computers have raised the relative demand for skilled labor, the widely touted skill-biased technological change hypothesis. However, several models argue the skill-intensity of technology is endogenously determined by the relative supply of skilled labor. We use instruments for the supply of human capital coupled with a rich dataset on computer usage by businesses to show that the supply of human capital is an important determinant of the adoption of personal computers. Our results suggest that great caution must be exercised in placing economic interpretations on the correlations often found between technology and human capital.

IT Capital, Job Content and Educational Attainment

Based on a large data set containing information on occupations between 1979 and 1999, this study explores the black box surrounding the skill-biased technological change hypothesis by analyzing the mechanisms that induce information technologies to be complementary to employees with higher skill levels. Using direct, multidimensional measures of occupational skill requirements, the analysis shows that IT capital substitutes repetitive manual and repetitive cognitive skills, whereas it complements analytical and interactive skills. These changes in the within occupational task mix result in an increased deployment of employees with high levels of education who have comparative advantages in performing non-repetitive cognitive tasks.

Technological intensity and inter-sectoral dynamics of inequality: evidence from the OECD, 1970-1990

Conceicao [1] found empirical support for a relationship between levels of GDP per capita and levels of inequality conforming to an augmented Kuznets curve, corresponding to a cubic augmentation of the traditional quadratic functional form first proposed by Kuznets [2]. Inspired by Galbraith [3], we analyse the dynamics of inequality dividing, for each country, the industries into two sectors those that are more technologically intensive are part of the K (for knowledge) sector, with the remaining industries being part of the C (for consumption) sector. We find that the between K and C sectors component of inequality is positively associated with income per capita, the within C sector component is negatively associated with income, and that the K sector component follows a cubic relationship similar to the augmented Kuznets hypothesis. These results help to understand the drivers of the dynamics of overall inequality. As a country grows richer, the earnings in the K sector increase relatively to the C sector. This description of the dynamics of inequality, and its relationship with technology, differs from the skill-biased technological change hypothesis, since technology is not considered to be a radio wave affecting inequality through the mediation of returns to skills, but rather is considered to be a fundamental, characteristic, differentiating industries in the way they generate profits and earnings.