Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

Karnit Flug*, Zvi Hercowitz

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


The effects of equipment investment on relative wages and employment of skilled labor are estimated. The basic hypothesis is that such effects are positive, because of the presence of either equipment-skill complementarity or skill advantage in technology adoption. Using a panel data set for a wide range of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a positive and strong effect of machinery investment on the relative demand for skilled labor, with the relative wage responding much sooner and for a much shorter time than relative employment. Journal of Economic Literature Classification Number: E24.

Original languageEnglish
Pages (from-to)461-485
Number of pages25
JournalReview of Economic Dynamics
Issue number3
StatePublished - Jul 2000


  • Equipment investment; skill premium


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