Are Technology Transfers Skill Biased?

  • Swati VirmaniEmail author


A growing consensus suggests that absorption of new technology has a bias towards skilled labour. We investigate the relationship between technology change and demand for skilled workers by taking into account an array of tests to find evidence if technology has important effects on skill premium. This paper adopts an exploratory approach. Using a panel data for Indian manufacturing industries over the period between 2001–2002 and 2013–2014, this paper depicts the rising trend of skilled workers, decomposes the trend into within and between industries, suggests capital-skill complementarity as an important factor behind increasing skill demand, and identifies whether skill-biased technology change (SBTC) is the key determinant of the trend observed. Our results show that not enough evidence can be found in favour of SBTC in case of India, a pattern comparable to 1990s as shown by previous studies. The study contributes as a good starting point to understand what accounts for the relative changes in industrial skill intensity.


Skill-biased technology change Within- and between-industry decomposition Capital-skill complementarity Technology indicators Service-oriented industries 

JEL Classification

J23 J24 E22 F66 O33 



  1. Bartel, A.P., and F.R. Lichtenberg. 1987. The Comparative Advantage of Educated Workers in Implementing New Technology. The Review of Economics and Statistics LXIX(1): 1–11.CrossRefGoogle Scholar
  2. Berman, E. 2000. Does Factor-Biased Technological Change Stifle International Convergence? Evidence from Manufacturing. NBER working paper no. 7964.Google Scholar
  3. Berman, E., J. Bound, and Z. Griliches. 1994. Changes in the Demand for Skilled Labor Within US Manufacturing: Evidence from the Annual Survey of Manufacturers. The Quarterly Journal of Economics 109(2): 367–397.CrossRefGoogle Scholar
  4. Berman, E., J. Bound, and S. Machin. 1998. Implications of Skill-Biased Technological Change: International Evidence. The Quarterly Journal of Economics 113(4): 1245–1279.CrossRefGoogle Scholar
  5. Berman, E., and S. Machin. 2000a. Skill-Biased Technology Transfer Around the World. Oxford Review of Economic Policy 16(3): 12–22.CrossRefGoogle Scholar
  6. Berman, E., and Machin, S. 2000b. Skill-Biased Technology Transfer: Evidence on the Factor Bias of the Technological Change in Developing Countries. Paper presented at the “Globalisation and Labour Markets” Conference, University of Nottingham, July.Google Scholar
  7. Berman, E., Somanathan, R., and Tan, H.W. 2005. Is Skill-biased Technological Change Here Yet? Evidence from Indian Manufacturing in the 1990s. World Bank policy review working paper 3761, vol. 1.Google Scholar
  8. Burstein, A., J. Cravino, and J. Vogel. 2013. Importing Skill-Biased Technology. American Economic Journal: Macroeconomics 5(2): 32–71.Google Scholar
  9. Economist. 2017. India’s Economy: Just the Job. September 16th–22nd 2017 Issue, pp. 52–53.Google Scholar
  10. Eicher, T.S. 1996. Interaction Between Endogenous Human Capital and Technological Change. Review of Economic Studies 63: 127–144.CrossRefGoogle Scholar
  11. Goldberg, P.K., and Pavcnik, N. 2007. Distributional Effects of Globalization in Developing Countries. NBER working paper series, no. 12885.Google Scholar
  12. Harrison, R. 2008. Skill-Based Technology Adoption: Firm-Level Evidence from Brazil and India. The Institute for Fiscal Studies WP08/03.Google Scholar
  13. Kapoor, R. 2015. Creating Jobs in India’s Organised Manufacturing Sector. The Indian Journal of Labour Economics 58(3): 349–375.CrossRefGoogle Scholar
  14. Kapoor, R. 2016. Technology, Jobs and Inequality: Evidence from India’s Manufacturing Sector. ICRIER working paper no. 313.Google Scholar
  15. Kianto, A., P. Hurmelinna-Laukkanen, and P. Ritala. 2010. Intellectual Capital in Service: And Product-Oriented Companies. Journal of Intellectual Capital 11(3): 305–325.CrossRefGoogle Scholar
  16. Kijima, Y. 2006. Why did Wage Inequality Increase? Evidence from Urban India 1983–99. Journal of Development Economics 81: 97–117.CrossRefGoogle Scholar
  17. Krugman, P. 1995. Technology, Trade and Factor Prices. NBER working paper 5355.Google Scholar
  18. Krusell, P., L.E. Ohanian, J. Ríos-Rull, and G.L. Violante. 2000. Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis. Econometrica 68(5): 1029–1053.CrossRefGoogle Scholar
  19. Machin, S., and J. Van Reenen. 1998. Technology and Changes in Skill Structure: Evidence from Seven OECD Countries. The Quarterly Journal of Economics 113(4): 1215–1244.CrossRefGoogle Scholar
  20. Mincer, J. 1989. Human Capital Responses to Technological Change in the Labor Market. NBER working paper no. 3207.Google Scholar
  21. Nelson, R.R., and E.S. Phelps. 1966. Investment in Humans, Technological Diffusion, and Economic Growth. American Economic Review 56(2): 69–75.Google Scholar
  22. Solow, R.M. 1957. Technical Change and the Aggregate Production Function. The Review of Economics and Statistics 39(3): 312–320.CrossRefGoogle Scholar
  23. Verhoogen, E.A. 2008. Trade, Quality Upgrading, and Wage Inequality: In the Mexican Manufacturing Sector. The Quarterly Journal of Economics 123(2): 489–530.CrossRefGoogle Scholar
  24. Violante, G.L. 2008. Skill-biased Technical Change. In The New Palgrave Dictionary of Economics, ed. S.N. Darlauf and L.E. Blume. New York, NY: Palgrave Macmillan.Google Scholar
  25. Zhu, S.C., and D. Trefler. 2005. Trade and Inequality in Developing Countries: A General Equilibrium Analysis. Journal of International Economics 65: 21–48.CrossRefGoogle Scholar

Copyright information

© Indian Society of Labour Economics 2019

Authors and Affiliations

  1. 1.Department of Economics and Marketing, Faculty of Business and LawDe Montfort UniversityLeicesterUK

Personalised recommendations