Skill-biased Technological Change Research Articles

R&D innovation, industrial evolution and the labor skill structure in China manufacturing

This paper utilizes the skill-biased technological change and routine-biased technological change hypotheses, along with the theory of firms' innovation behavior, to establish a comprehensive analytical framework. This framework aims to elucidate the mechanisms through which technological innovation, industrial evolution, and education affect the labor skill structure in China manufacturing. The empirical results that have been gathered can be succinctly described in the following manner: (1) Research and development innovation stimulates the demand for high-and low-skilled labor, and, the rising of total factor productivity reduces the demand for low-skilled labor, confirming the labor-friendly effect of product innovation and the labor-saving effect of process innovation. (2) The cyclical pattern of fluctuating demand for low-skilled labor can be attributed to the industrial concentration, driven by technological advancements. Nevertheless, the phenomenon of cyclicality has not been observed for high-skilled labor. (3) There exists a paradoxical relationship between higher education and industrial demand, wherein education and skill are mismatched. (4) There exists the SBTC in China manufacturing resulted from process innovation. However, the SBTC does not explain the cause or mechanism behind the relative productivity shift and the higher demand for educated workers. This paper examines several policy implications including R&D innovation, employment, and education.

Is the wage premium on using computers at work gender-specific?

Past research on the relationship between computers and wages has revealed two stylized facts. First, workers who use a computer at work earn higher wages than similar workers who do not (termed as ‘the computer wage premium’). Second, women are more likely to use a computer at work than are men. Given the recognized computer wage premium and women’s advantage in computer use at work, we ask: Is the wage premium on using computers at work gender- or non-gender-specific? Given gendered processes operating at both the occupational and within-occupation levels, we expect that returns to computer usage are gender-bias. This contrasts the skill-biased technological change (SBTC) theory assumption that the theorized pathways through which computers boost earnings are non-gender-specific productivity-enhancing mechanisms. Analyzing occupational data on computer use at work from O*NET attached to the 1979–2016 Current Population Surveys (CPS) and individual-level data from the 2012 Survey of Adult Skills (PIAAC), we find that the computer wage premium is biased in favor of men at the occupation level. We conclude by suggesting that computer-based technologies relate to reproducing old forms of gender pay inequality due to gendered processes that operate mainly at the structural level (i.e., occupations) rather than at the individual level.

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.

Public administration managers' and employees' perceptions of adaptability to change under “the future of work” paradigm

The future is uncertain and brings with it changes and challenges. Public employees' tasks are changing with the rise of digital transformation. It is crucial to improve the skills of public administration employees and anticipate what new skills they will need to prepare them for the future of work. This study explores the effects of digital, communication, intrapreneurial, and fundraising competencies on public employees' readiness for the future of work. A conceptual model was designed based on the theory of future-ready skills and the theory of skill-biased technological change. PLS-SEM was then used to test nine research hypotheses. Digital competencies and intrapreneurial competencies were found to have a significant impact on employee readiness for the future of work. Communication competencies and digital competencies were observed to be correlated with intrapreneurial competencies. Besides its contribution to the literature on skills for the future of work, this paper offers valuable suggestions for public administration decision makers and public employees, as well as higher education institutions and other places of learning.

Routinization and Employment: Evidence for Latin America

We study changes in employment by occupations characterized by different degree of exposure to routinization in the six largest Latin American economies over the last two decades. We combine our own indicators of routine task content based on information from the Programme for the International Assessment of Adult Competencies (PIACC) with labor market microdata from harmonized national household surveys. We find that the increase in jobs was decreasing in the automatability of the tasks typically performed in each occupation, and increasing in the initial wage, a pattern more consistent with the traditional skill-biased technological change than with the polarization hypothesis.

Are vulnerable farmers more easily influenced? Heterogeneous effects of Internet use on the adoption of integrated pest management

The Internet is believed to bring more technological dividends to vulnerable farmers during the green agriculture transformation. However, this is different from the theory of skill-biased technological change, which emphasizes that individuals with higher levels of human capital and more technological endowments benefit more. This study investigates the effects of Internet use on farmers’ adoption of integrated pest management (IPM), theoretically and empirically, based on a dataset containing 1 015 farmers in China's Shandong Province. By exploring the perspective of rational inattention, the reasons for the heterogeneity of the effects across farmers with different endowments, i.e., education and land size, are analyzed. The potential endogeneity issues are addressed using the endogenous switching probit model. The results reveal that: (1) although Internet use significantly positively affects farmers’ adoption of IPM, vulnerable farmers do not benefit more from it. Considerable selection bias leads to an overestimation of technological dividends for vulnerable farmers; (2) different sources of technology information lead to the difference in the degree of farmers’ rational inattention toward Internet information, which plays a crucial role in the heterogeneous effect of Internet use; and (3) excessive dependence on strong-tie social network information sources entraps vulnerable farmers in information cocoons, hindering their ability to reap the benefits of Internet use fully. Therefore, it is essential to promote services geared towards elderly-oriented Internet agricultural technology information and encourage farmers with strong Internet utilization skills to share technology information with other farmers actively.

Technology adoption and jobs: The effects of self-service kiosks in restaurants on labor outcomes

This study explores how technology adoption affects labor. I investigate the effect of restaurants' adoption of self-service kiosks on labor outcomes, using survey data from Korea. I find that businesses’ adoption of self-service kiosks had little impact on their number of full-time or part-time workers. However, restaurants with a self-service kiosk decreased both the wages of their part-time workers and the number of unpaid family members they employed. The results are driven by franchise restaurants. Independently owned restaurants that adopted kiosks increased the wages of their full-time workers. These findings provide support for the efficiency wage theory as well as the skill-biased technological change theory. The results suggest that when businesses adopt new technologies, these technologies do not replace unskilled labor, but rather raise the relative wages of skilled workers.

New Evidence about Skill-Biased Technological Change and Gender Wage Inequality

In recent decades, the wage gap between higher- and lower-skilled workers has steadily widened around the world, and this gap is widening. There are several approaches in the literature to understand the causes of this steady increase, with Skill-Biased Technological Change (SBTC) being the most used and the results more consistent. This paper aims to deepen the understanding of this wage gap among workers in Organisation for Economic Cooperation and Development (OECD) countries, using cluster analysis and then modeling through simultaneous equations for the period between 2007 and 2020. Albeit with varying intensity, we conclude that in all clusters, there is a strong influence of the wage gap of the less skilled on the widening of the wage gap of the more skilled, with this influence being even more intense in the case of women. The SBTC approach can also be detected in all clusters but with greater intensity in the case of countries that invest more in research and development (R&D). Education spending and gross domestic product (GDP) per capita also play a role in widening the wage gap as well as in reducing gender inequalities. We also conclude that each cluster has its specificities that justify the choice made and that a slow reduction in gender wage inequality is observed in all clusters.

International Trade and Wage Inequality in India: Does Direction of Trade Matter?

After following import-substituting policies for nearly three decades, India opted for liberal economic regime in the early 1990s. Since then, it has emerged as one of the fastest growing economies in the world. However, concerns have been raised about the distributional consequences of liberalization. This article attempts to quantify the impact of trade on wage inequality in the Indian manufacturing sector. Estimating a relative wage equation with a panel of 49 manufacturing industries, this article found a positive association between trade and wage disparity in Indian manufacturing, but the association is contingent on the direction of trade. Our results show that after controlling skill-biased technological change and other variables, trade, especially exports to developed and developing countries, has an opposite impact on wage disparity.

Skill-Biased Technological Change and Gender Inequality across OECD Countries—A Simultaneous Approach

Of the various approaches that, over the last few decades, have sought explanations for the constant increase in the wage gap between more and less skilled workers, the Skill-Biased Technological Change (SBTC) approach has been the most used and the one that has led to the most consistent results. The objective of this study is to assess whether the possible mobility between different types of workers, considering their experience and professional training, and this way, replacing more skilled workers in terms of education widens or reduces the wage gap between qualifications. For this purpose, we resorted to the modeling of simultaneous equations taking into account the OECD countries between 2007 and 2020, concluding that there is a strong influence of the wage gaps of the less qualified in the widening of the gaps of the more qualified and that this influence is more significant in the case of women. Education continues to promote the increase in wage differences in favor of the most qualified, as well as the SBTC approach. We also conclude that women’s wage gaps are approaching the average of most workers, thus reducing wage inequality between genders.

Who is Replaced by Robots? Robotization and the Risk of Unemployment for Different Types of Workers

We study the effects of robotization on unemployment risk for different types of workers. We examine the extent to which robotization increases inequality at the skill level and at the occupational level using two theoretical frameworks: skill-biased technological change and task-biased technological change. Empirically, we combine worker-level data with information on actual investments in industrial robots. Zooming in on the German manufacturing industry, our multivariate results show that robotization affects different types of workers differently. We do not observe an increase in unemployment risk for low- and medium-skilled, but we find a considerably lower unemployment risk among high-skilled workers. Moreover, the unemployment risk is significantly higher in occupations with highly substitutable tasks, but only in industries that invest largely in robots.

Inequality and identity salience

This paper provides a simple model of identity salience that is applied to the phenomenon of the recent rise in right-wing populism in the Western world. Trade and capital flows, skill-biased technological change, and migration have led to declining employment and wages in these economies and a parallel rise in economic and cultural populism, tapping into nativist sentiments. We argue that when long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, one has zero-sum economics and that naturally raises the possibility of using various kinds of social identities to claim a bigger share of a fixed sized pie. We show that in ethnically or racially polarized societies this naturally leads to the salience of social identities that enable majority ethnic groups to vote for policies that exclude minority groups so that they get a greater share of a dwindling surplus. In contrast, in more ethnically and racially homogeneous societies, this would instead lead to the demand for more pro-redistribution policies that involve greater provision of public goods.

Skill bias, financial frictions, and selection into entrepreneurship

Financial frictions adversely affect productivity by discouraging entrepreneurship, which is often measured by the self-employed. This paper distinguishes different types of self-employment when studying this question. Using micro data for 77 countries from all income levels, we show that employers’ labor shares are increasing with GDP per capita, whereas own-account employment (self-employed without employees) is decreasing. We also find almost universally negative selection on education into own-account status relative to wage workers and positive selection into employers. To quantitatively match these facts, we introduce skill-biased technological change across countries in an occupational choice model with financial frictions. Our model predicts an average of 19% output gains in low-income countries from removing financial frictions. In contrast, an alternative model with skill-neutral technological change cannot match the high own-account employment share in low-income countries, thus overestimating the output gains by 13 percentage points.

Distributional Effects of Trade Liberalisation on Wages in India

There is a high level of policy interest on the effect of trade liberalisation on inequality, especially in developing countries, because of their large vulnerable populations. India also initiated the process of liberalisation as a response to the severe balance of payments crisis of 1991. However, both rural and urban inequality has been increasing since the period 1993–1994, with urban inequality increasing at a higher rate. This study empirically examines the impact of trade openness on wage inequality using panel data for Indian states (separately for rural and urban areas). The results of this study indicate that trade openness does not lead to decrease in the wage inequality in the states and their rural areas. However, urban wage inequality is found to be increasing due to trade openness. These results are analysed and explained by various factors present in the Indian economy such as, skill biased technological changes; trade in intermediate goods; barriers to domestic labour mobility; and pattern and composition of India’s exports. An interesting aspect emerging is that higher education levels lead to increase in wage inequality as returns to education and inequality are increasing and the increase is also attributed to liberalisation. JEL Codes: F16, O18, C23

Creators' Income Situation in the Digital Age

The digital transformation imposes both opportunities and risks for creativity and for creative employment, with implications for trends in income levels and the distribution of income. First, we consider skill-biased technological change as a determinant of income and labor market outcomes in the arts. Arguably, the IT revolution has changed the demand for certain skills, with creative occupations being more in demand than general employment. Second, we consider declines in the costs of generating new works and artistic experimentation due to digital technologies, and their effect on the barriers to entry in labor markets. Third, we touch upon the rise of online contract labor in certain creative professions as a determinant of income. Here, online platforms can change creators’ access to work opportunities and it may alter the way income is distributed. We find that wage trends for creative workers in the digital age outperform general trends in the population: based on various data sources and various ways to identify creators, we see creators losing less or even gaining a better income position in relative terms. From a policy perspective, results do not lend support to the idea that creators’ income situation has systematically worsened with the rise of the internet and its intermediaries. Evidence on changing distributions of income is ambiguous as trends differ from one country to the next.

The Effect of Changes in Labor Demand and Entrepreneurship on Income Inequality Through Innovation

The highly skill-biased technological changes brought about by innovation have changed the employment market greatly. This paper examines the impact of changes in labor demand and entrepreneurship, as a result of technological innovation, on income inequality in the form of a literature review, with analysis of related theoretical and empirical research studies. Innovation is positively correlated with income inequality from two points of view – labor demand and entrepreneurship. Firstly, innovations alter the demand for high-skilled and unskilled labor, and thereby change the skill premia– developments which, in turn, influence income inequality. Secondly, increased entrepreneurship enables entrepreneurs to accumulate more wealth due to higher financial returns. The paper departs from the approach adopted in most traditional papers, which analyze the relationship from a single perspective, by taking a multi-angled approach, with examination of the effect of labor demand and entrepreneurship on income equality from innovations. The study also identifies research gaps in the current literature and direction exploring the effects of innovation on income inequality going forward.

Can digital skill protect against job displacement risk caused by artificial intelligence? Empirical evidence from 701 detailed occupations.

To identify the role of digital skill in the skill-biased technological changes caused by artificial intelligence, this study estimates the impacts of displacement risk on occupational wage and employment and examines the moderation effects of digital skill through the occupational data from the U.S. Bureau of Labor Statistics through the methods of fixed-effects modeling, heterogeneity analyzing and moderation effect testing. The results highlight three main points that (1) the displacement risk by artificial intelligence has significantly negative effects on occupational wage and employment, (2) the heterogeneous effects across occupational characteristics are significant, and (3) the digital skill exerts a significant moderation effect to protect against displacement risk. The core policy implication is suggested to emphasize digital skill in education and training across occupations to accommodate job requirements in the future.

Government Welfare Policy Under a Skilled-Biased Technological Change

In a world where machines replace unskilled work, an active labor market policy—represented by the combination of an optimal Earned Income Tax Credit (EITC) and income maintenance for the unemployed—provides incentives to increase participation in the labor market and depresses wages for unskilled employees. In this paper, this policy is tested against the alternative of allowing unskilled workers to receive a means-tested basic income (MTBI), as recently adopted by Spain. For a liberal social planner (i.e., includes consumption and leisure in individual utility), the MTBI dominates the active labor market policy. For a conservative social planner (i.e., evaluates social welfare based on individual utility from consumption), the active labor market policy dominates the MTBI. The potential dynamic effects of active labor policy on labor supply were considered in a simulation using updated empirical estimates; it shows that this policy becomes preferable for both types of the social planner.

Employment 5.0: The work of the future and the future of work

This systematic review brings together the collection of recent scholarly outputs on the disruptive impact of digital transformation on the work. This paper draws from a sample of 68 outputs from 2011 to 2022. We identify three key theoretical perspectives: socio-technical systems theory, skill-biased technological change, and political economy of digital transformation. The articles provide complementary insights on cross-cutting themes of technological unemployment, wage inequality and job polarization. They also highlight often conflicting views about technology ownership, work-less utopia, education reforms and the imperative of human-centricity in appropriation of technology. Drawing on the findings across the whole spectrum of theoretical and analytical perspectives, we offer critical reflections about the factors that will define the work of the future, in terms of skills, creativity and opportunities for autonomous workers. We also discuss the political and institutional processes that will shape the future of work. Finally, we offer recommendations for future research and policy interventions.

Spatial Polarisation*

Abstract We document the emergence of spatial polarisation in the United States during the 1980–2008 period. This phenomenon is characterised by stronger employment polarisation in larger cities, both at the occupational and the worker levels. We quantitatively evaluate the role of technology in generating these patterns by constructing and calibrating a spatial equilibrium model. We find that faster skill-biased technological change in larger cities can account for a substantial fraction of spatial polarisation in the United States. Counterfactual exercises suggest that the differential increase in the share of low-skilled workers across city size is due mainly to the large demand by high-skilled workers for low-skilled services and, to a smaller extent, to the higher complementarity between low- and high-skilled workers in production relative to middle-skilled workers.