Product lifecycles and skill-biased technical change
Sanders, Mark (2002). Product lifecycles and skill-biased technical change. UNU-MERIT Research Memoranda. UNU-MERIT.
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Sub-type Working paper Author Sanders, Mark Title Product lifecycles and skill-biased technical change Series Title UNU-MERIT Research Memoranda Volume/Issue No. 12 Publication Date 2002 Publisher UNU-MERIT Language eng Abstract The labour market position of low skilled workers has deteriorated dramatically over the 80s and early 90s. A well-known manifestation of this deterioration is the rise in relative high-skilled wages observed in the United States. It is a well-documented fact that demand shifts underlie this deterioration and several studies indicate that technical change is a likely candidate to explain such relative demand shifts. It is, however, still not very well understood why technological change would be biased persistently against low skilled workers when their relative labour costs are dropping. Modern economics considers technological change to be endogenous and the result of rational decisions taken by economically constrained agents. This paper presents a model that provides two possible answers to this puzzle. The bias can be caused by the deliberate development of skilled labour complementary technologies under certain conditions. If these conditions are met, the bias and the resulting labour demand shift is a permanent one and so are the consequences for relative wages and employment levels. A slightly different specification with more realistic assumptions, however, can still explain the observed shift in demand. When I assume that the production of new products is inherently skill biased because uncertainty is high and flexibility required in the initial stages of the product life cycle, then the model can generate the shift in response to the introduction of a new general-purpose technology, for example the IT- revolution. Once new products mature and process innovations are made can low skilled workers be involved in the production of such products. As such the model introduces some old ideas into a new debate. Copyright Year 2002 Copyright type All rights reserved -
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