Working Paper

Skill-Biased Technological Change and the Business Cycle


  • Balleer
  • A.
  • van Rens
  • T.
Publication Date

Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions. Hours fall in response to skill-biased technology shocks, indicating that at least part of the technology-induced fall in total hours is due to a compositional shift in labor demand. Investment-specific technology shocks reduce the skill premium, indicating that capital and skill are not complementary in aggregate production.


JEL Classification
E24, E32, J24, J31

Key Words

  • business cycle
  • capital-skill
  • Complementarity
  • Long-run Restrictions
  • skill premium
  • skill-biased technology
  • VAR