In skill-biased (de-skilling) technological revolutions learning investments required by new machines are greater (smaller) than those required by preexisting machines. Skill-biased (de-skilling) revolutions trigger reallocations of capital from slow- (fast- ) to fast- (slow- ) learning workers, thereby reducing the relative and absolute wages of the former. The model of skill-biased (de-skilling) revolutions provides insight into developments since the mid-1970's (in the 1910's). The empirical work documents a large increase in the interindustry dispersion of capital-labor ratios since 1975. Changes in industry capital intensity are related to the skill composition of the labor force. (JEL E23 J31 O33)

In a model with heterogeneity in managerial talent, we compare the economic and political consequences of reforms aimed at reducing fixed costs of entry (deregulation) and improving the efficiency of financial markets (financial reform). The effects of these reforms depend on the market where control rights over incumbent firms are traded. In the absence of a market for control, both reforms increase the number and the average quality of firms, and are politically equivalent. When a market for control exists, financial reform induces less entry than deregulation, and endogenously compensates incumbents, thereby encountering less political opposition from them. Using this result, we show that financial reform may be used in the short run to open the way for future deregulation. Our model sheds light on the privatization and reform experiences of formerly planned economies as well as on the observed path of reforms in economies of the Organisation for Economic Co-operation and Development.

We study cross-country differences in the aggregate production function when skilled and unskilled labor are imperfect substitutes. We find that there is a skill bias in cross-country technology differences. Higher-income countries use skilled labor more efficiently than lower-income countries, while they use unskilled labor relatively and, possibly, absolutely less efficiently. We also propose a simple explanation for our findings: rich countries, which are skilled-labor abundant, choose technologies that are best suited to skilled workers; poor countries, which are unskilled-labor abundant, choose technologies more appropriate to unskilled workers. We discuss alternative explanations, such as capital-skill complementarity and differences in schooling quality.

In Caselli and Coleman (2000) we developed a framework that separately identifies the efficiency units embodied in unskilled labor, skilled labor, and capital in a country’s aggregate production function. Applying that framework to cross-country data, we showed that countries where unskilled labor is relatively abundant are those with the most efficient unskilled workers, while countries where skilled labor and capital are abundant are the most efficient users of these inputs. We interpreted these findings as evidence of appropriatetechnology adoption: in each country firms choose from a menu of technologies; different technologies imply different combinations of values for the efficiency units embodied in the three factors of production; in each country the technology is chosen that makes the most of the most abundant factors. In this paper we apply the same framework to time-series data from the United States over the period 1963–1992. We find that throughout this period the efficiencies of skilled labor and capital have risen. The efficiency of unskilled labor has risen in tandem with those of the other factors in the early part of the sample, but surprisingly, it has been falling since sometime in the 1970’s (the exact turning point depends somewhat on some parametric assumptions). In analogy with the cross-country evidence, these changes are closely associated with changes in the relative abundance of skilled labor and capital, which increased rather dramatically. In this sense, the recent history of technologies in use by U.S. firms may mimic the choice of technologies around the world today: as skills and capital become more abundant, technologies are chosen that maximize the efficiency of these inputs. As we discuss below, however, in the U.S. context the converse story (relative labor supplies adjusting to exogenous changes in technology) is also consistent with the data. Besides its relevance to models of technology adoption, this evidence also sheds new light on the widely documented recent increase in the skilled wage premium in the United States. Lawrence F. Katz and Kevin M. Murphy (1992) and David H. Autor et al. (1998) used the relative wage and the relative labor supply series to show that the efficiency of unskilled labor relative to skilled labor must have declined over time. Our framework allows us to go further and show that, indeed, the absolute efficiency of unskilled labor has fallen (after 1970), while the efficiency of skilled labor and capital have increased. A similar result was obtained with different techniques by Marta Ruiz Arranz (2001).

We use data on imports of computer equipment for a large sample of countries between 1970-90 to investigate the determinants of computer-technology adoption. We find strong evidence that computer adoption is associated with higher levels of human capital and with manufacturing trade openness vis-à-vis the OECD. We also find evidence that computer adoption is enhanced by high investment rates, good property rights protection, and a small share of agriculture in GDP. Finally, there is some evidence that adoption is reduced by a large share of government in GDP, and increased by a large share of manufacturing. After controlling for the above-mentioned variables, we do not find an independent role for the English- (or European-) language skills of the population.

We present a joint study of the U.S. structural transformation (the decline of agriculture as the dominating sector) and regional convergence (of southern to northern average wages). We find empirically that most of the regional convergence is attributable to the structural transformation: the nationwide convergence of agricultural wages to nonagricultural wages and the faster rate of transition of the southern labor force from agricultural to nonagricultural jobs. Similar results describe the Midwest's catch-up to the Northeast (but not the relative experience of the West). To explain these observations, we construct a model in which the South (Midwest) has a comparative advantage in producing unskilled laborintensive agricultural goods. Thus it starts with a disproportionate share of the unskilled labor force and lower per capita incomes. Over time, declining education/training costs induce an increasing proportion of the labor force to move out of the (unskilled) agricultural sector and into the (skilled) nonagricultural sector. The decline in the agricultural labor force leads to an increase in relative agricultural wages. Both effects benefit the South (Midwest) disproportionately since it has more agricultural workers. With the addition of a less than unit income elasticity of demand for farm goods and faster technological progress in farming than outside of farming, this model successfully matches the quantitative features of the U.S. structural transformation and regional convergence, as well as several other stylized facts on U.S. economic growth in the last century. The model does not rely on frictions on interregional labor and capital mobility, since in our empirical work we find this channel to be less important than the compositional effects the model emphasizes.

We study theoretically and empirically whether natural resource windfalls affect political regimes. We show that windfalls have no effect on democracies, while they have heterogeneous political consequences in autocracies. In deeply entrenched autocracies, the effect of windfalls is virtually nil, while in moderately entrenched autocracies, windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work, we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents. The model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the the differential impact within autocracies.

Jones (2014 ) examines development accounting with imperfect substitutability between different types of skills in the production of output. He finds that human capital variation can account for the totality of the variation in income across countries. We show that this finding is entirely due to an assumption that the relative wage of skilled workers is solely determined by attributes of workers (once the supply of skilled workers is accounted for). If skill premia are predominantly determined by technology, institutions, and other features of the economic environment, human capital differences explain none of the variation in income per worker. (JEL E24, I26, J24, J31)

This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets, and incomes. These tools are applied to the Ramsey-Cass-Koopmans model of optimal savings and the Arrow-Romer model of productive spillovers. The RC property per se places very few restrictions on the nature of observed distributions, and a wide range of distributive dynamics and income mobility patterns can arise as the equilibrium outcome. An example illustrates how to use these tools to generate quantitative predictions and compare them to the data. (JEL E13, O41)