Full Citation
Title: Technological Transitions with Skill Heterogeneity Across Generations
Citation Type: Miscellaneous
Publication Year: 2019
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Abstract: How do economies adjust to technological innovations? We develop a theory where overlapping generations of workers are heterogeneous over a continuum of technology-specific skills. Forward-looking investment decisions upon entry determine the worker’s skill-type. Given a type’s technology-specific wage, workers self-select into a technology. We show that this economy can be represented as a q-theory of skill investment. This allow us to sharply characterize the transitional dynamics and welfare implications of a technology-improving innovation. The adjustment is slower in economies with higher technology-skill specificity because the larger increases in relative wages induce larger, more persistent changes in the skill distribution across generations. We then empirically study the adjustment of developed economies to recent cognitive-biased technological innovations. We find strong responses of cognitive-intensive employment for young but not old generations. This suggests that cognitive-skill specificity is high and that the supply of cognitive skills is elastic at longer horizons. In such economies, ignoring the adjustment across generations by extrapolating from changes at short or long horizons alone leads to severe biases in the average and distributional welfare implications of technological innovations.
Url: https://pdfs.semanticscholar.org/7387/7af4aad89ffa7dc842e171231016a08d5e8f.pdf
Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3512984
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Authors: Adao, Rodrigo; Beraja, Martin; Pandalai-Nayar, Nitya
Publisher: University of Chicago
Data Collections: IPUMS International
Topics: Labor Force and Occupational Structure, Other
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