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Almut Balleer ,
Thijs van Rens

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
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