Capital-Skill Complimentarity and Wage Outcomes following Technical Change in a Global Model
Date
2000
Authors
Tyers, Rod
Yang, Yongzheng
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Abstract
We estimate the extent of factor bias in technical changes consistent with observed changes in skill premia. To control for the effects of expanded trade on wages we use a structural model with multiple regions and comparative static analysis. Two alternative biased technical change stories emerge: skill enhancement when capital and skill are substitutes and capital enhancement when capital and skill are complements. These imply different underlying technical change processes and macroeconomic behaviour in response to technical change shocks. Capital enhancement offers the more credible process, however, and is consistent with observed rises in the “equipment content” of the capital stock.
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capital-skill complementarity, global trade, technical change, labour markets, wages
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Working/Technical Paper
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