NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?

Jonathan E. Haskel, Matthew J. Slaughter

NBER Working Paper No. 6565
Issued in May 1998
NBER Program(s):   LS   ITI

This paper examines whether the sector bias of skill-biased technical change (sbtc) explains changing skill premia within countries in recent decades. First, using a two-factor, two-sector, two-country model we demonstrate that in many cases it is the sector bias of sbtc that determines sbtc's effect on relative factor prices, not its factor bias. Thus, rising (falling) skill premia are caused by more extensive sbtc in skill-intensive (unskill-intensive) sectors. Second, we test the sector-bias hypothesis using industry data for many countries in recent decades. An initial consistency check strongly supports the hypothesis. Among ten countries we find a strong correlation between changes in skill premia and the sector bias of sbtc during the 1970s and 1980s. The hypothesis is also strongly supported by more structural estimation on U.S. and U.K. data of the economy-wide wage changes mandated' to maintain zero profits in all sectors in response to the sector bias of sbtc. The suggestive mandated-wage estimates match the direction of actual wage changes in both countries during both the 1970s and the 1980s. Thus, the empirical evidence strongly suggests that the sector bias of sbtc can help explain changing skill premia.

download in pdf format
   (248 K)

email paper

This paper is available as PDF (248 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6565

Published: Haskel, Jonathan E. and Matthew J. Slaughter. "Does The Sector Bias Of Skill-biased Technical Change Explain Changing Skill Premia?," European Economic Review, 2002, v46(10,Dec), 1757-1783.

Users who downloaded this paper also downloaded these:
Card and DiNardo w8769 Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles
Acemoglu w7800 Technical Change, Inequality, and the Labor Market
Haskel and Slaughter w6978 Trade, Technology and U.K. Wage Inequality
Berman, Bound, and Machin w6166 Implications of Skill-Biased Technological Change: International Evidence
Berman w7964 Does Factor-Biased Technological Change Stifle International Covergence? Evidence from Manufacturing
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us