Technological progress renders various skills obsolete, however, the rate of skill obsolescence will vary according to the worker's human capital investments. Workers heavily invested in general skills, such as education, will not suffer high rates of obsolescence, while less-educated workers who invest more in "technology-specific" skills will suffer more when the technology is changed. Consistent with this framework, this chapter demonstrates that increasing randomness is the primary source of inequality growth within uneducated workers, whereas inequality growth within educated workers is determined more by predictable factors. Furthermore, this chapter shows that increasing randomness generates a "precautionary" demand for education.
|Title of host publication
|The Economics of Skills Obsolescence
|Number of pages
|Published - 2002
|Research in Labor Economics
Bibliographical noteFunding Information:
For helpful comments, we wish to thank Lex Borghans, Oded Galor, Peter Howitt, Bas ter Weel, Finis Welch, and seminar participants at the “Understanding Skills Obsolescence Conference 2001” in Maastricht. We are also grateful to the Maurice Falk Institute for financial support and to Vadim Marmer for research assistance.