Skill-Biased Technological Change and the Business Cycle

• Abstract

  Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Investment-specific technology shocks reduce the skill premium, indicating that capital and skill are not complementary in aggregate production.

• Keywords

  skill-biased technology, skill premium, VAR, long-run restrictions, capital-skill
  , 
  complementarity, business cycle

• JEL classification

  E24, E32, J24, J31

• Download

  KWP_1775