Skill-biased technical change is a shift in the production technology that favours skilled over unskilled labour by increasing its relative productivity and, therefore, its relative demand. Traditionally, technical change is viewed as factor-neutral. However, recent technological change has been skill-biased. Theories and data suggest that new information technologies are complementary with skilled labour, at least in their adoption phase. Whether new capital complements skilled or unskilled labour may be determined endogenously by innovators’ economic incentives shaped by relative prices, the size of the market, and institutions. The ‘factor bias’ attribute puts technological change at the center of the income-distribution debate.
Capital–skill complementarity Elasticity of substitution Factor-neutral technical change Income distribution Information technology Innovation Learning Production functions Research and development Skill premium Skill-biased technical change Solow, R. Substitutes and complements Technical change Technology–skill complementarity Total factor productivity
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