Cyclical Skill-Biased Technological Change∗

Preliminary and incomplete. www.crei.cat/˜vanrens/skillbias Over the past two decades, technological progress has been biased towards making skilled labor more productive. The evidence for this finding is based on the persistent parallel increase in the skill pre-mium and the supply of skilled workers. What are the implications of skill-biased technological change for the business cycle? To answer this question, we use the CPS outgoing rotation groups to construct quarterly series for the price and quantity of skill. The unconditional correlation of the skill premium with the cycle is zero. However, using a structural VAR with long run restrictions, we find that technology shocks substantially increase the premium. Investment-specific tech-nology shocks are not skill-biased and our findings suggest that capital and skill are (mildly) substitutable in aggregate production