Labor Supply and Personal Computer Adoption

The positive correlations found between computer use and human capital are often interpreted as evidence that the adoption of computers has raised the relative demand for skilled labor, the widely touted skill-biased technological change hypothesis. However, several models argue that the skill intensity of technology is endogenously determined by the relative supply of skilled labor. We use instruments for the supply of human capital coupled with a rich data set on computer usage by businesses to show that the supply of human capital is an important determinant of the adoption of personal computers. Our results suggest that great caution must be exercised in placing economic interpretations on the correlations often found between technology and human capital.