Working Paper

Skill-Biased Technological Change and the Business Cycle


  • Almut Balleer
  • Thijs van Rens
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