published in: Journal of Econometrics, 2005, 126 (2), 549-570
This article applies recent advances in productivity and efficiency measurement to the
evaluation of skillbiased technical change. Using the general index approach we are able to
establish an explicit and unconstrained time path for nonneutral technical change between
production and nonproduction labor in U.S. manufacturing industries over the 1959-1996
period. Our findings confirm the prevailing interpretation in the labor economics literature that
substantial reductions in the relative share of production labor are attributable to a sustained
period of nonneutral technical change. However, we find that skill-biased technical change
effects are most evident prior to 1983. This predates the diffusion of personal computer
technologies in the workplace and the dramatic wage structure changes associated with the
1980’s. In contrast to prevailing alternatives, the general index approach also permits us to
explain observed shifts in relative labor demand as a combination of price-induced
substitution, nonhomothetic output effects and skill-biased technical change responses to a
range of proposed elements.
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