Abstract
Using a broad panel of advanced economies, we document that increases in GDP per capita are associated with a systematic shift in the composition of value added to sectors that are intensive in high-skill labour, a process we label as skill-biased structural change. It follows that further development in these economies leads to an increase in the relative demand for skilled labour. We develop a quantitative two-sector model of this process as a laboratory to assess the sources of the rise of the skill premium in the U.S. and a set of ten other advanced economies, over the period 1977 to 2005. For the U.S., we find that the sector-specific skill neutral component of technical change accounts for 18-24% of the overall increase of the skill premium due to technical change, and that the mechanism through which this component of technical change affects the skill premium is via skill-biased structural change.
Original language | English (US) |
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Pages (from-to) | 592-625 |
Number of pages | 34 |
Journal | Review of Economic Studies |
Volume | 89 |
Issue number | 2 |
DOIs | |
State | Published - Mar 1 2022 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
Keywords
- Skill premium
- Structural change