Skill Biased Technological Change And Labor Market Polarization

Since the1990s, American and European countries generally experienced a polarization of the labor market, the share of employment of high-skilled labor and low-skilled labor rose, the share of employment of mid-skilled labor decline.Moreover, wage polarization also appeared in American. Labor market polarization means that the income of The Medium Income Group deteriorated, so this phenomenon is concerned gradually by academic and policy areas. This paper analyse the Mechanism of how labor endowments, international trade and institutional quality impact skill biased technological change, and the impact of skill biased technological change on labor martek polarization from the perspective of skill biased technological change.Theoretical model, which is the first part of the paper, establishment a three-factor model contains high-skilled labor, mid-skilled labor and low-skilled labor.This model analyse the reason of biased technological change, and the impact of biased technological change on the labor market inequality. The results surgest that (1) when high-skilled labor and low-skilled labor are complementary, and substitute with mid-skilled labor, increasing of relative supply of high-skilled labor will promote high-skilled biased technological change, thereby increasing the demand and wage of the high-skilled labor and low-skilled labor relative to mid-skilled labor, thus the labor market polarization ocuured;(2) If south countries have favorable protection of property rights, the North-South trade can promote mid-skilled biased technological change, thus does not promote labor market polarization.in the other word, If south countries have poor protection of property rights, North-South trade can promote high skill-biased technological change, then promote labor market polarization;(3) High-skilled biased technological change require higher institutional quality, or institutional quality have greater impact on high-skilled biased technological change, thus institutional quality will promote high-skilled biased technological change.Empirical research which is the second part of the paper test the results of the theory analysed in the first part using Europe and United States data. Empirical analyes show that the theoretical analysis is consisting with the empirical facts.(1) Labor Endowment has positive impact on high-skilled technological change.Furthermore, high-skilled labor is substitute with mid-skilled labor and low-skilled labor between1970and1990, and thus the rise of relative supply of high skill labor spurred high-skilled biased technological change. While high-skilled labor is complement with low-skilled labor between1990and2007, thus the rise of relative supply of high-skilled labor spurred high-skilled biased technological change, but curbed mid-skilled biased technological change.(2)North-South trade and the trade between developed countries significantly promote high-skilled biased technological change, but its effect is less than the impact of labor endowment on the skill biased technological change.Additionally, this paper also analyse the impact of China-Developed Contries trade on skill biased technological change and labor market polarization in developed countries, the results show that China’s import and export to developed countries indeed increase high-skilled biased technological change.(3)Institutional quality significantly promote high-skilled biased technological change, in particular, institutional quality have greater impact on technology innovation of high-skilled industries than mid-skilled industries.(4) Skill biased technological change and international trade significantly promote the polarization of the labor market, but skill biased technological change have greater impact on labor market polarization than international trade.So this paper find that the main reason of skill biased technological change and labor market polarization in developed countries is the changes of labor endowment structure, international trade and China factor is a secondary reason.