Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology

While intermediate inputs account for more than half of a final product’s value, intersectoral linkages have been ignored as a source of skill bias. Previous empirical studies have investigated skill demand at the worker-, firm-, and sector-level. This paper extends the standard skill-biased technical change (SBTC) framework, introducing skill complementarity via input-output linkages. This generates a mul-tiplier effect that magnifies small sector-level skill bias into a large aggregate impact on skill demand. We construct a proxy for the skill bias embedded in each sector’s intermediates: Input skill intensity. This variable correlates strongly with the skill share employed in final production – a novel stylized fact that points towards technology-skill complementarity across sectors. Together with input-output linkages, the observed complementarity reinforces skill demand along the production chain. The effect is large, accounting for about one third of the observed skill upgrading in U.S. manufacturing over the perio