Capital–Skill Complementarity: Does Capital Composition Matter?

Juan A. Correa; Miguel Lorca; Francisco Parro

doi:10.1111/sjoe.12267

Capital–Skill Complementarity: Does Capital Composition Matter?

Juan A. Correa, Miguel Lorca, Francisco Parro

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

We estimate the effect of capital composition on the size of capital–skill complementarity and the skill wage premium. Disaggregating the capital stock into different types according to technological content, we find that: capital is more of a q-complement to skilled labor than to unskilled labor; the higher the technological component of capital, the larger the size of the relative q-complementarity between capital and skilled labor; and replacing non-technological with technological capital might increase the skill wage premium by about 9 percent. Our results highlight that changes in capital composition matter for understanding changes in the skill wage premium.

Original language	English
Pages (from-to)	89-116
Number of pages	28
Journal	Scandinavian Journal of Economics
Volume	121
Issue number	1
DOIs	https://doi.org/10.1111/sjoe.12267
Publication status	Accepted/In press - 1 Jan 2018

Keywords

Skill wage premium
technological capital
translog function

ASJC Scopus subject areas

Economics and Econometrics

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10.1111/sjoe.12267

Cite this

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title = "Capital–Skill Complementarity: Does Capital Composition Matter?",

abstract = "We estimate the effect of capital composition on the size of capital–skill complementarity and the skill wage premium. Disaggregating the capital stock into different types according to technological content, we find that: capital is more of a q-complement to skilled labor than to unskilled labor; the higher the technological component of capital, the larger the size of the relative q-complementarity between capital and skilled labor; and replacing non-technological with technological capital might increase the skill wage premium by about 9 percent. Our results highlight that changes in capital composition matter for understanding changes in the skill wage premium.",

keywords = "Skill wage premium, technological capital, translog function",

author = "Correa, {Juan A.} and Miguel Lorca and Francisco Parro",

note = "Funding Information: *We thank H{\'e}ctor Calvo, Mauricio Larra{\'i}n, Alex Mennuni, Carmine Ornaghi, Fernando Parro, two anonymous referees, and all participants at the Latin American Meeting of the Econometric Society and the Society of Labor Economists meeting for their comments and suggestions. J. A. Correa also thanks FONDECYT for financial support (grant no. 11121620).",

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PY - 2018/1/1

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N2 - We estimate the effect of capital composition on the size of capital–skill complementarity and the skill wage premium. Disaggregating the capital stock into different types according to technological content, we find that: capital is more of a q-complement to skilled labor than to unskilled labor; the higher the technological component of capital, the larger the size of the relative q-complementarity between capital and skilled labor; and replacing non-technological with technological capital might increase the skill wage premium by about 9 percent. Our results highlight that changes in capital composition matter for understanding changes in the skill wage premium.

AB - We estimate the effect of capital composition on the size of capital–skill complementarity and the skill wage premium. Disaggregating the capital stock into different types according to technological content, we find that: capital is more of a q-complement to skilled labor than to unskilled labor; the higher the technological component of capital, the larger the size of the relative q-complementarity between capital and skilled labor; and replacing non-technological with technological capital might increase the skill wage premium by about 9 percent. Our results highlight that changes in capital composition matter for understanding changes in the skill wage premium.

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KW - translog function

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Capital–Skill Complementarity: Does Capital Composition Matter?

Abstract

Keywords

ASJC Scopus subject areas

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