Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles

The rise in wage inequality in the U.S. labor market during the 1980s is usually attributed to skill-biased technical change (SBTC), associated with the development of personal computers and related information technologies. We review the evidence in favor of this hypothesis, focusing on the implications of SBTC for economy-wide trends in wage inequality, and for the evolution of wage differentials between various groups. A fundamental problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s, despite continuing advances in computer technology. SBTC also fails to explain the closing of the gender gap, the stability of the racial wage gap, and the dramatic rise in education-related wage gaps for younger versus older workers. We conclude that the SBTC hypothesis is not very helpful in understanding the myriad shifts in the structure of wages that have occurred over the past three decades.

Do Immigrant Inflows Lead to Native Outflows?

We use 1980 and 1990 Census data for 119 larger Metropolitan Statistical Areas to examine the effect of skill-group specific immigrant inflows on the location decisions of natives in the same skill group, and on the overall distribution of human capital. To control for unobserved skill-group specific demand factors, our models include lagged mobility flows of natives over the 1970-80 period. We also estimate instrumental variables models that use the fraction of Mexican immigrants in 1970 to predict skill-group specific relative immigrant inflows over the 1980s. Despite wide variation across cities in the size and relative skill composition of immigrant population changes we find no evidence of selective out-migration by natives. We conclude that immigrant inflows exert a direct effect on the relative skill composition of cities: cities that have received relatively unskilled immigrant flows have experienced proportional rises in the size of their unskilled populations.

Technology and U.S. wage inequality: a brief look

As labor market analysts in the late 1980s and early 1990s documented a rising wage inequality, a series of papers argued that this development was related to rapid technological change. These papers and the large literature that followed established a basis for the virtually unanimous agreement among economists that developments in computers and related information technologies in the 1970s, '80s, and '90s have led to increased wage inequality. ; This view has become known as the "skill-biased technological change" (SBTC) hypothesis-the view that a burst of new technologies increased demand by employers for highly skilled workers (who are more likely to use computers) and that this increased demand led to a rise in the wages of the highly skilled relative to those of the less skilled. ; The authors of this article reconsider the evidence for the SBTC hypothesis and focus on changes over time in overall wage inequality and in the evolution of different groups of workers' relative wages. In doing so, they conclude that SBTC falls far short of unicausal explanation of the substantial changes in the U.S. wage structure of the 1980s and 1990s and does not, by itself, prove to be particularly helpful in organizing or understandings these changes. The article concludes that it is time to re-evaluate the case that SBTC offers a satisfactory explanation for the rise in U.S. wage inequality.Wages ; Productivity ; Technology ; Economic development

Active Labor Market Policy Evaluations: A Meta-analysis

This paper presents a meta-analysis of recent microeconometric evaluations of active labor market policies. Our sample consists of 199 program estimates drawn from 97 studies conducted between 1995 and 2007. In about one-half of these cases we have both a short-term impact estimate (for a one-year post-program horizon) and a medium-term estimate (two-year horizon). We characterize the program estimates according to the type and duration of the program, the characteristics of the participants, and the evaluation methodology. Heterogeneity in all three dimensions affects the likelihood that an impact estimate is significantly positive, significantly negative, or statistically insignificant. Comparing program types, subsidized public sector employment programs have the least favorable impact estimates. Job search assistance programs have relatively favorable short-run impacts, whereas classroom and on-the-job training programs tend to show better outcomes in the medium-run than the short-run. Programs for youths are less likely to yield positive impacts than untargeted programs, but there are no large or systematic differences by gender. Methodologically, we find that the outcome variable used to measure program effectiveness matters. Evaluations based on registered unemployment durations are more likely to show favorable short-term impacts. Controlling for the outcome measure, and the type of program and participants, we find that experimental and non-experimental studies have similar fractions of significant negative and significant positive impact estimates, suggesting that the research designs used in recent non-experimental evaluations are unbiased.

A practical experience with independent verification and validation

One approach to reducing software cost and increasing reliability is the use of an independent verification and validation (IV & V) methodology. The Software Engineering Laboratory (SEL) applied the IV & V methodology to two medium-size flight dynamics software development projects. Then, to measure the effectiveness of the IV & V approach, the SEL compared these two projects with two similar past projects, using measures like productivity, reliability, and maintain ablilty. Results indicated that the use of the IV & V methodology did not help the overall process nor improve the product in these cases

An empirical study of software design practices

Software engineers have developed a large body of software design theory and folklore, much of which was never validated. The results of an empirical study of software design practices in one specific environment are presented. The practices examined affect module size, module strength, data coupling, descendant span, unreferenced variables, and software reuse. Measures characteristic of these practices were extracted from 887 FORTRAN modules developed for five flight dynamics software projects monitored by the Software Engineering Laboratory (SEL). The relationship of these measures to cost and fault rate was analyzed using a contingency table procedure. The results show that some recommended design practices, despite their intuitive appeal, are ineffective in this environment, whereas others are very effective

Criteria for software modularization

A central issue in programming practice involves determining the appropriate size and information content of a software module. This study attempted to determine the effectiveness of two widely used criteria for software modularization, strength and size, in reducing fault rate and development cost. Data from 453 FORTRAN modules developed by professional programmers were analyzed. The results indicated that module strength is a good criterion with respect to fault rate, whereas arbitrary module size limitations inhibit programmer productivity. This analysis is a first step toward defining empirically based standards for software modularization

Designing with Ada for satellite simulation: A case study

A FORTRAN-operated and an Ada-oriented design for the same system are compared to learn whether an essentially different design was produced using Ada. The designs were produced by an experiment that involves the parallel development of software for a spacecraft dynamics simulator. Design differences are identified in the use of abstractions, system structure, and simulator operations. Although the designs were significantly different, this result may be influenced by some special characteristics discussed

The effect of firm-level contracts on the structure of wages: evidence from matched employer-employee data

Revised: 2006-11In Spain, as in several other European countries, sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set to study the effects of firm-level contracting on the structure of wages. We estimate conventional wage determination models and a richer set of models that control for the characteristics of coworkers and the probability the workplace is covered by a firm-level contract. Our estimates suggest that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a noncompetitive phenomenon.Sara de la Rica gratefully acknowledges financial support from the FFBVA (1/BBVA 00044.321-15467/2002) and the Spanish Ministry of Education (BEC2003-04826)