Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis

Krusell, Per; Ohanian, Lee E.; Ŕıos-Rull, José-V́ıctor; Violante, Giovanni L.

doi:10.21034/sr.239

Cited by 466 publications

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“…According to Acemoglu () and Katz and Murphy (), new technologies lead to increases in the productivity of skilled workers and their wages, enlarging this wage gap. Krusell, Ohanian, Ríos‐Rull, and Violante () argue that improvement in capital‐embodied productivity leads to rising demand for equipment and, when equipment is complementary with skilled labour, the wage gap rises. This gap‐enlarging finding has been confirmed by many scholars, including Aghion, Howitt, and Violante (), Esquivel and Rodrıguez‐López (), Moore and Ranjan (), and Van Reenen ().…”

Section: Introductionmentioning

confidence: 99%

Technical change and income inequality in China

Zhang

Wan²,

Wang

et al. 2017

World Economy

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The purpose of this paper was to explore the inequality–technical change relationship. Different from earlier studies, we aim to gauge the impact of technical change on the overall inequality, not just a particular component of inequality. This is achieved by establishing that the labour share of income is negatively correlated with overall inequality as indicated by the popular Gini coefficient and by modelling the labour share of income as a function of technical change. The empirical model of labour share of income is estimated using 1978–2012 provincial panel data from China. The main estimation results show that technical change in China had been mostly capital‐biased. It contributed to the successive reductions in China's labour share of income and thus rapid rises in income inequality.

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Section: Introductionmentioning

confidence: 99%

Technical change and income inequality in China

Zhang

Wan²,

Wang

et al. 2017

World Economy

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“…2 2 See Griliches (1969) for early evidence and Goldin and Katz (1998), Krusell et al (2000) and Duffy et al (2004), for more recent support of this assumption. …”

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confidence: 99%

The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth

Egger

Falkinger

et al. 2010

The World Economy

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This paper examines the impact of capital market integration on higher education and the link to economic growth. The analysis takes into account that participation in higher education is noncompulsory and depends on individual choice. Due to capital-skill complementarity, integration increases (reduces) the incentives to participate in higher education in capital-importing (-exporting) economies, all other things equal. From a national policy point of view, public education expenditure should increase after integration of similar economies in order to attract mobile capital. Using foreign direct investment as a measure of capital flows, we present empirical evidence which largely confirms our main hypothesis: an increase in net capital inflows in response to capital market integration raises participation in higher education. In addition, we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth. The impact of capital market integration on educational choice and the consequences for economic growth Abstract This paper examines the impact of capital market integration on higher education and the link to economic growth. The analysis takes into account that participation in higher education is non-compulsory and depends on individual choice. Due to capital-skill complementarity, integration increases (reduces) the incentives to participate in higher education in capital-importing (-exporting) economies, all other things equal. From a national policy point of view, public education expenditure should increase after integration of similar economies in order to attract mobile capital. Using foreign direct investment as a measure of capital flows, we present empirical evidence which largely confirms our main hypothesis: an increase in net capital inflows in response to capital market integration raises participation in higher education. In addition, we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth. This paper examines the impact of capital market integration on higher education and the link to economic growth. The analysis takes into account that participation in higher education is non-compulsory and depends on individual choice. Due to capital-skill complementarity, integration increases (reduces) the incentives to participate in higher education in capital-importing (-exporting) economies, all other things equal. From a national policy point of view, public education expenditure should increase after integration of similar economies in order to attract mobile capital. Using foreign direct investment as a measure of capital flows, we present empirical evidence which largely confirms our main hypothesis: An increase in net capital inflows in response to capital market integration raises participation in higher education. In addition, we show that the adjustment in educational attainment is an empirically relevant channel through whi...

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“…There is further disagreement within the second strand of the literature since one line of thought argues that the factor bias of technical change can account for the observed changes in the skill premium (see e.g., Krugman ; Acemoglu ), while another points to the sector bias of technical change as the culprit (see Kahn and Lim ; Haskel and Slaughter for details). Finally, Krusell et al () provide an explanation for the increasing pattern of the skill premium in the United States due to capital‐skill complementarities, a result further validated by Polgreen and Silos ().…”

Section: Introductionmentioning

confidence: 73%

Accounting for Skill Premium Patterns: Evidence from the EU Accession

Cho

Díaz

2016

Southern Economic Journal

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In this article, we decompose the joint and individual contributions of tariff reductions, productivity changes and capital deepening to account for the skill premium patterns of the transition economies that joined the European Union (EU) in 2004. To conduct our accounting analysis, we construct an applied general equilibrium model with skilled and unskilled labor, and combining Social Accounting Matrices, Household Budget Surveys and the EU KLEMS Growth and Productivity Accounts database, we calibrate it to match Hungarian data, a transition economy where the skill premium consistently increased between 1995 and 2005. We find that capital deepening coupled with capital‐skill complementarity is the main force behind the rise in the skill premium.

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Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis

Cited by 466 publications

References 0 publications

Technical change and income inequality in China

Technical change and income inequality in China

The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth

Accounting for Skill Premium Patterns: Evidence from the EU Accession

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