November 1998 | STEPHEN MACHIN AND JOHN VAN REENEN
This paper examines the relationship between skill structure changes and technological change in seven OECD countries: Denmark, France, Germany, Japan, Sweden, the United Kingdom, and the United States. The authors investigate whether a directly observed measure of technical change, R&D intensity, is closely linked to the growth in the importance of highly skilled workers, which has occurred in all countries. The results show a significant association between skill upgrading and R&D intensity in all seven countries, indicating that skill-biased technical change is an international phenomenon that has increased the relative demand for skilled workers. The findings are robust to alternative measures of skill and technology, and the authors do not find that trade measures, such as the share of imports from less developed countries, are important in explaining within-industry skill structures. The paper also explores the robustness of the results by examining alternative technology measures, the effects of trade, the potential endogeneity of R&D, and international spillover effects. Overall, the evidence suggests that technology plays a significant role in shaping the skill structure of labor markets in industrialized nations.This paper examines the relationship between skill structure changes and technological change in seven OECD countries: Denmark, France, Germany, Japan, Sweden, the United Kingdom, and the United States. The authors investigate whether a directly observed measure of technical change, R&D intensity, is closely linked to the growth in the importance of highly skilled workers, which has occurred in all countries. The results show a significant association between skill upgrading and R&D intensity in all seven countries, indicating that skill-biased technical change is an international phenomenon that has increased the relative demand for skilled workers. The findings are robust to alternative measures of skill and technology, and the authors do not find that trade measures, such as the share of imports from less developed countries, are important in explaining within-industry skill structures. The paper also explores the robustness of the results by examining alternative technology measures, the effects of trade, the potential endogeneity of R&D, and international spillover effects. Overall, the evidence suggests that technology plays a significant role in shaping the skill structure of labor markets in industrialized nations.