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Skill-Biased Technical Change

Abstract

Skill-biased technical change is a shift in the production technology that favours skilled over unskilled labour by increasing its relative productivity and, therefore, its relative demand. Traditionally, technical change is viewed as factor-neutral. However, recent technological change has been skill-biased. Theories and data suggest that new information technologies are complementary with skilled labour, at least in their adoption phase. Whether new capital complements skilled or unskilled labour may be determined endogenously by innovators’ economic incentives shaped by relative prices, the size of the market, and institutions. The ‘factor bias’ attribute puts technological change at the center of the income-distribution debate.

Keywords

  • Capital–skill complementarity
  • Elasticity of substitution
  • Factor-neutral technical change
  • Income distribution
  • Information technology
  • Innovation
  • Learning
  • Production functions
  • Research and development
  • Skill premium
  • Skill-biased technical change
  • Solow, R.
  • Substitutes and complements
  • Technical change
  • Technology–skill complementarity
  • Total factor productivity

JEL Classifications

  • D4
  • D10

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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Acknowledgment

I am grateful to the CV Starr Center for research support.

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Violante, G.L. (2008). Skill-Biased Technical Change. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2388-1

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  • DOI: https://doi.org/10.1057/978-1-349-95121-5_2388-1

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