Skill Bias in an Endogenous Growth Model: Evaluating the Case for Market Size and Acceleration Effects

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Skill-biased technical change occupied empirical economists for much of the 1990s. The empirical literature firmly established a positive correlation between technology indicators and demand shifts. In the minds of many, that has established a causal relationship. This leap of faith, however, is at odds with Hicks's conventional wisdom that endogenous technological change will be biased toward using cheap and abundant resources. In addition, if the rate of technical change is considered to be endogenous, the assumption of an exogenous bias toward skilled labor should at least be questioned. Two hypotheses explaining endogenous skill bias in technical change have been suggested in the theoretical literature: the acceleration effect and the market size effect. In this paper, these are studied in a single endogenous-growth model to derive the sufficient and necessary conditions for both hypotheses. After confronting these conditions with the evidence, the paper concludes that it strongly favors the acceleration hypothesis.
Original languageEnglish
Pages (from-to)802-829
Number of pages28
JournalMacroeconomic Dynamics
Volume17
Issue number4
Publication statusPublished - 1 Jun 2013
Externally publishedYes

Keywords

  • General Aggregative Models: Neoclassical
  • Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • Human Capital; Skills; Occupational Choice; Labor Productivity
  • Management of Technological Innovation and R&D
  • Technological Change: Choices and Consequences; Diffusion Processes
  • One, Two, and Multisector Growth Models

Cite this