Returns to Human Capital and Investment in New Technology
IMF Working Papers, September 1, 2001
Source details
- Canonical URL
- Returns to Human Capital and Investment in New Technology
Other formats
Bibliographic details
- Authors: Rodolfo Luzio, Steven V Dunaway, Martin D Kaufman
- Published: September 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451855494.001
Analytical framework and central thesis
- Presents a simple framework linking skill-based wage differentiation and human capital acquisition under skill-biased technical progress.
- Emphasizes the role of the skill premium in fostering:
- human capital accumulation, and
- the adoption of new technologies.
- Identifies economic costs that arise when labor market and income redistribution policies prevent the skill premium from performing this role.
Comparative analysis
- Cross-country comparison among Canada, France, Germany, the United Kingdom, and the United States.
- Observed differences:
- Wage differentiation varies across these five countries.
- Investment in new technologies differs across these five countries.
- The study suggests these cross-country differences could be related to policies affecting labor markets and may reflect social choices.
Key findings
- Skill-based wage differentiation is linked to incentives for acquiring human capital in the presence of skill-biased technical progress.
- Policies that compress or distort the skill premium can generate economic costs by:
- reducing incentives for human capital accumulation, and
- slowing adoption of new technologies.
- Cross-country variation in wage differentiation and technology investment is consistent with the influence of labor market and redistribution policies.
Policy implications and recommendations (as implied by the analysis)
- Recognize the signaling and incentive role of the skill premium for:
- human capital investment decisions, and
- technology adoption decisions.
- Reassess labor market and income redistribution policies that blunt the skill premium if the goal is to encourage human capital accumulation and technological adoption.
- Consider that policy choices affecting wage differentiation reflect broader social choices with economic trade-offs for growth and innovation.
Subjects and keywords emphasized by the study
- Subjects: Education, Human capital, Labor, Skilled labor, Technological innovation, Technology, Wages.
- Keywords (selection from the source): dispersion in Germany, earnings distribution, earnings inequality, human capital, income redistribution policies, New technology, pay, premium, premium in the United States, skill premium, Skilled labor, Technological innovation, wage differentiation, wage dispersion, wage earnings, wage premia, wage premium, Wages.
IMF Working Paper — Returns to Human Capital and Investment in New Technology; Rodolfo Luzio, Steven V Dunaway, Martin D Kaufman; September 1, 2001.
Content in this bundle
- Returns to Human Capital and Investment in New Technology - WP/01/133