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The Economic Impact of Skill-Biased Technical Change

May 09, 2016

Erik Brynjolfsson, Frank MacCrory, and George Westerman


Rapid advances in digital technologies have profound implications for work. Many middle and low skill jobs have disappeared, contributing to increasing inequality, falling labor force participation and stagnating median incomes. Yet this stagnating median masks a surprising amount of variation among different groups. A large literature shows that skill-biased technical change (SBTC) has led, on average, to real wage declines for those with less than a college degree and real increases for those with more education.  However, college education is not a simple on/off trait, and skill is not a single dimensional construct. How do education and skills interact with technical change to affect the labor market?  Using rigorous econometric analysis, we identify distinct dimensions of skill.  Then, we assess their interactions with education and technology to affect wages, occupational demand, and other economically important outcomes.