DP1434 Technology and Changes in Skill Structure: Evidence from an International Panel of Industries

Author(s): Stephen Machin, John Van Reenen
Publication Date: July 1996
Keyword(s): Employment, R&D, Skills, Technology
JEL(s): J51, O33
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1434

This paper examines the evidence that rapid upgrading of the skill structure in recent years was driven by technological change. Four countries are examined who have had different wage inequality and unemployment trends ? Denmark, Sweden, the United Kingdom and the United States. The analysis of changes in wage bill shares and employment shares of more skilled workers leads us to the following conclusions: (i) within-industry changes are the driving force of aggregate shifts across all four countries; (ii) there is evidence of skill-biased technical change and capital-skill complementarity in all four countries; (iii) the results are robust to using education instead of occupation as a measure of skill, and computerization instead of R&D as a measure of technology; (iv) in the Anglo-Saxon countries a maximum of one-third of the aggregate change in the skill structure can be accounted for purely by technological factors; (v) the decline of collective bargaining, rather than trade, in the United Kingdom and the United States is an important factor in explaining the changes.