- University of Palermo
Wednesday, September 30, 2020
Zoom webinar: https://univr.zoom.us/j/94158553628
We present a nonparametric framework to estimate marginal productivity (MP) and skill biased technical change (SBTC) directly from the production function while simultaneously allowing for the presence of labor market imperfections. We use this framework to show that SBTC can bring about a less efficient use of labor as long as it does not come with higher skill premia and/or adjustment in the hired quantities of skilled and unskilled labor. Indeed, using country-sector information (38 countries, 25 sectors, 1995-2005), we find most of the average growth rate in the marginal rate of technical substitution (MRTS) between skilled and unskilled labor (32.3%) is driven by SBTC (36.1%), rather than factor accumulation (-3.9%), and the discrepancy between MRTS and relative wages (i.e., economic inefficiency) grows by 6%. Adjustment of labor quantities to relative wages would bring about output gains ranging from 13% to 18%; adjustment of wages to MPs would increase wage inequality from 0.76 to 0.82 (Gini index). Economic inefficiency is found to grow less in less skill-intensive sectors and when the labor market institutions are such that skilled workers have a relatively higher bargaining power and job reallocation is easier. Moreover, it decreases more in more inefficient country-sectors (i.e., convergence).
The seminar will be delivered online. To join the webinar, please click on this link: https://univr.zoom.us/j/94158553628