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Date Published:Mar 1, 1999
I present a simple model of technological revolutions. A technological revolution is the introduction of a new generation of machines that can only be operated by workers who have learned a set of machine-specific skills. If learning the new skills is more (less) costly than learning the skills associated with pre-existing technologies, the revolution is skill biased (deskilling). On impact, skill-biased (deskilling) revolutions trigger a reallocation of capital from high (low) learning cost to low(high) learning cost workers, thereby reducing the relative and absolute wage of the former. Thus, the model of skill-biased revolutions replicatesthe observed recent changes in the wage structure, and constitutes a possible interpretation of the Information Technology Revolution.
It also provides insight into the future possible behavior of the wage structure, as the diffusion of information technology continues. The model of deskilling revolutions constitutes a possible interpretation of the introduction ofthe assembly line in the early 1910s. I also present some new facts from the Annual Survey of Manufacturing. The inter-industry dispersion of capital-labor ratios has increased substantially and abruptly after 1975. Increases in capital-labor ratios between 1975 and 1990 are positively correlated across industries with changes in pay per worker, changes in the proportion of non-production workers in total employment, high average-wage levels in 1975, and high non-production worker shares in 1975. I argue that my theory constitutes one possible explanation for these facts.