Capital-skill Complementarity and Inequality: A Macroeconomic Analysis

Krusell, Per; Ohanian, Lee E.; Ríos-Rull, José V́ictor; Violante, Giovanni L.

doi:10.1111/1468-0262.00150

“…In Section 3, we introduce the nested constant elasticity of substitution production function (Sato (1967) and Krusell et. al.…”

Section: Figure 1 About Herementioning

confidence: 99%

Capital–skill complementarity and the immigration surplus

Ben-Gad

¹

2008

Review of Economic Dynamics

View full text Add to dashboard Cite

Citation: Ben-Gad, M. (2008). Capital-skill complementarity and the immigration surplus.Review of Economic Dynamics, 11(2), pp. 335-365. doi: 10.1016/j.red.2007.08.001 This is the unspecified version of the paper.This version of the publication may differ from the final published version. Permanent AbstractWe build a neo-classical growth model with overlapping dynasties and capital-skill complementarities to evaluate changes in immigration policy. Calibrating the model using U.S. data, we quantify the differential effects of skilled and unskilled immigration on factor returns and on the welfare of different sectors of the population. An influx of high-skilled immigrants lowers the wages of skilled workers, raises the wages of unskilled workers, and because of the relative complementarity between capital and skilled labor, substantially raises the rate of return to native-owned capital. By contrast, an influx of unskilled immigrants produces an opposite effect on wages, and has only a negligible effect on the return to capital. Because of capital skill-complementarity, an increase in the number of skilled immigrants generates an immigration surplus-the overall welfare benefit accruing to the native population-that is approximately ten times larger than the immigration surplus generated by an identical increase in the number of unskilled immigrants.This differential welfare effect is far higher than can be accounted for by the disparity between the productivities of each type of worker.JEL Classification Numbers: E69, J61, O41.

show abstract

“…We also include the special case examined by Krusell et al (2000) and demonstrate how technical progress terms may be identified in this case. Then section 3.3 makes the equivalent analysis for the four-factor, two-level CES case.…”

Section: Multi-level Multi-factor Ces Production Functionsmentioning

confidence: 99%

Unraveling the Skill Premium

McAdam

¹

,

Willman

²

2017

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFor the US the supply and wages of skilled labor relative to those of unskilled labor have grown over the postwar period. The literature has tended to explain this through "skill-biased technical change". Empirical work has concentrated around two variants:(1) Capital-skill complementarity, and (2) Skill-augmenting technical change. Our purpose is to nest and discriminate between these two explanations. We do so in the framework of 2-and 3-level CES production function where factors are disaggregated into skilled and unskilled labor, and the capital stock into structures and equipment capital. Using a 5-equation system approach and several nesting alternatives, we retrieve estimates of the elasticities of substitution and factor augmenting technical changes. Non-technical summaryFor the US and many other countries, the relative supply of skilled labor has grown markedly over the post-war period. Despite this expansion of supply, there has a large increase in the real wages of skilled labor relative to unskilled labor. This wedge is what we call the skill premium. How might we explain this phenomenon? The literature has tended to explain this through "skill-biased technical change". In particular, empirical work has concentrated around two variants: (1) Capital-skill complementarity, and (2) Skill-augmenting technical change. This does not preclude other explanations (off shorting, de-unionization etc.). But it does tend to view those alternative explanations through the lens of these two channels. Taking these two channels, our purpose is essentially to nest and discriminate between these two explanations. We do so in the framework of 2-and 3-level CES production function where input factors of production are disaggregated into finer components. For labor this disaggregation is into skilled and unskilled labor, and, for the capital stock, into structures and equipment capital. We derive the five non-linear equation system with cross-equation constraints. We estimate them under different assumptions on how the four factors and technical change augmenting them are combined in three-and two-level CES production functions. We retrieve estimates of the elasticities of substitution and factor augmenting technical changes. Our framework allows us to decompose in each case the level and growth rate of the skill premium into three separate channels: (1) capital-skill complementarity, (2) technical change channels as well as (3) ...

show abstract

“…the direction can only be exogenous or endogenous. 3 The first case -the technology push story -is a general label under more specific mechanisms are put forth, such the technological revolution (Caselli, 1999), the decline in the price of ICT capital (Autor et al 2003, Krusell et al 2000, the introduction of General Purpose Technology (Aghion, 2002). The second case is the one in which technological change is directed because of profits incentives.…”

Section: From the Canonical Model To The Ricardian Modelmentioning

confidence: 99%

Endogenous skill biased technical change: testing for demand pull effect

Bogliacino¹,

Lucchese²

2015

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIn this article we use the unification of Germany in the 1990 to test the hypothesis that the increase of the supply of a production factor generates skill biased technical change. We test for this mechanism in the context of the Acemoglu and Autor (2011) model that allows for endogenous assignment of skills to tasks in the economy. We use cohorts of workers from comparable countries as a control groups.After discussing the possible confounding factors, we conclude for the absence of this effect.The differential pattern among the countries seems to be determined by labor market flexibilization and tax reform, which had a pure inequality enhancing effect.

show abstract

Capital-skill Complementarity and Inequality: A Macroeconomic Analysis

Cited by 1,386 publications

References 23 publications

Capital–skill complementarity and the immigration surplus

Capital–skill complementarity and the immigration surplus

Unraveling the Skill Premium

Endogenous skill biased technical change: testing for demand pull effect

Contact Info

Product

Resources

About