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International Handbook on the Economics of Education

Edited by Geraint Johnes and Jill Johnes

This major Handbook comprehensively surveys the rapidly growing field of the economics of education. It is unique in that it comprises original contributions on an exceptional range of topics from a review of human capital, signalling and screening models, to consideration of issues such as educational externalities and economic growth, funding models, determinants of educational success, the educational production function, educational standards and efficiency measurement. Labour market issues such as the market for teachers and the transition of students from school to work are also explored.
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Chapter 5: Skill-Biased Technical Change and Educational Outcomes

Stephen Machin


Stephen Machin 1 Introduction In recent years a great deal of attention has been placed on the skill-biased technical change hypothesis. The key premise of this hypothesis is that employers’ demand for labour has shifted dramatically in favour of more skilled and educated workers, principally owing to the fact that they are better suited to working with the new kinds of technologies in modern workplaces. Consequently there have been considerable adjustments in the skill structures of the workforces of many countries as the labour market has altered to cope with these new demands for work and with the new work systems that now operate. This has resulted in a significant improvement in the labour market fortunes of more skilled and educated workers and a significant deterioration in labour market outcomes for the less skilled. In many countries more skilled and educated workers have increased, not only their relative employment, but also their relative wages, thereby increasing labour market inequality. This chapter builds on, and in places reproduces, some of my earlier research on changes in relative labour demand and technology (some of which is cited in the references, especially Machin, 2002, 2003). It considers the skill-biased technical change hypothesis and its implications for economic outcomes. It explores the mechanisms that researchers have argued underpin the observed labour market shifts in favour of the more educated. The next section begins by presenting some descriptive material on temporal shifts in the skill/education structure of labour markets. Numbers are given for...

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