Are the Unskilled Hurt by
Biased Technological Change?
Some Qualifications from a General Equilibrium Perspective
(with Joachim Möller)
University of Regensburg Discussion Paper No. 353, January 2001.
Download as
pdf-file:
Abstract:
Our two-sector model with wage setting on imperfect labor markets reveals that the conventional wisdom with regard to the effects of biased technological change needs some qualifications. Based on a general equilibrium framework we show that the unskilled can indirectly profit from biased technological change via two channels: the increase in aggregate demand and the reduction in wage pressure due to a decline in the aggregate price level. Harmful employment consequences for the unskilled are only obtained under a solidaristic wage policy designed to let the unskilled participate in the productivity gains of the skilled. Furthermore, our results suggest that a decline in real wages for low-skilled workers cannot be explained by the hypothesis of skill-biased technological change alone.