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Title: Skill-Biased Technical Change and the Intergenerational Mobility of Skills
Citation Type: Miscellaneous
Publication Year: 2019
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Abstract: In the existing literature, skill-biased technical change (SBTC) is predominantly associated with widening the wag gap; but how has this increase in the returns to skill impacted intergenerational investments in human capital, and subsequently the mobility of skills? To answer this, I first develop a SBTC model with an intergenerational framework, where heterogeneously-skilled households make transfers to determine the skill outcome of their next generation. Under constant technology, the portion of skilled workers and returns to skill in the model evolve endogenously to steady-state. Comparative statistics then show that technical change, by increasing the returns to skill, leads to households adjusting their transfers so that the likelihood of their future generation becoming skilled improves. For empirical verification, I use Chetty’s (2014) data from U.S. commuting zones (CZs) which show how college attendance rates of children are linked to the income-rank of their parents. A technology measure for CZs is constructed using their share of STEM workers, which I instrument using a Bartik-type IV to deal with endogeneity concerns. From 2SLS estimations, I find that if a CZ lies 1 SD above the mean technology score, college attendance rates of children increase by 1.3 percent points for households ranked in the 25th percentile and by 0.55 points for households ranked in the 75th percentile. Thus, skill-biased technology is found to improve both absolute and relative skill mobility
Url: http://rcea.org/wp-content/uploads/2019/08/Aziz.pdf
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Authors: Aziz, Imran
Publisher: York University
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure
Countries: Canada