SKILL-BIASED TECHNICAL CHANGE AND THE WAGES: EVIDENCE FROM A LONGITUDINAL DATA SET

Brian Bell

Nuffield College, Oxford University

 

October 1996

 

Abstract

The widening of the wage structure in the 1980s has been attributed in large part to the impact of skill-biased technical change. Yet very few studies have shown a clear link between an individuals wage and their use of skill-biased technology. One important exception is Krueger (1993) who demonstrates a strong positive correlation between computer usage and wages. This paper explores this correlation in more detail and examines the impact on wages of other indicators of skill-biased technology. Using a longitudinal data set for the UK we show that computer use and other measures of skill are strongly correlated with earnings, appear to have a productivity enhancing interpretation and are not merely capturing unobserved characteristics. Furthermore the increased importance of these skills can explain a large fraction of the increase in the returns to education over the course of the 1980s.