Institut für Volkswirtschaftslehre

                                       Fachgebiet Dienstleistungs- und Arbeitsmarktökonomik (520G)

Prof. Dr. Thomas Beißinger

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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.

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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.