What Drives the Skill Premium: Technological Change or Demographic Variation?
نویسنده
چکیده
This paper quantitatively examines the e¤ects of two exogenous driving forces, investment-speci c technological change (ISTC) and the demographic change known as the baby boom and the baby bust,on the evolution of the skill premium in the postwar U.S. economy. I develop an overlapping generations general equilibrium model with endogenous discrete schooling choice. The production technology features capitalskill complementarity as in Krusell et al. (2000). ISTC, through capital-skill complementarity, raises the relative demand for skilled labor, while demographic variation a¤ects the skill premium through changing the age structure and hence relative supply of skilled labor. I nd that demographic change is more important in shaping the skill premium before 1980. Since then, ISTC takes over to drive the dramatic increase in the skill premium. JEL classi cation: E25 (Aggregate factor income distribution); I21 (Analysis of education); J24 (Human capital); J31 (Wage di¤erentials by skill); O33 (Technological change). Key Words: Skill Premium; Schooling Choice; Capital-Skill Complementarity; Investment-Speci c Technological Change; Demographic Change.
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