Are Technology Transfers Skill Biased?

Abstract

A growing consensus suggests that absorption of new technology has a bias towards skilled labour. We investigate the relationship between technology change and demand for skilled workers by taking into account an array of tests to find evidence if technology has important effects on skill premium. This paper adopts an exploratory approach. Using a panel data for Indian manufacturing industries over the period between 2001–2002 and 2013–2014, this paper depicts the rising trend of skilled workers, decomposes the trend into within and between industries, suggests capital-skill complementarity as an important factor behind increasing skill demand, and identifies whether skill-biased technology change (SBTC) is the key determinant of the trend observed. Our results show that not enough evidence can be found in favour of SBTC in case of India, a pattern comparable to 1990s as shown by previous studies. The study contributes as a good starting point to understand what accounts for the relative changes in industrial skill intensity.