The B.E. Journal of Economic Analysis & Policy
Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra
Ed. by Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine
4 Issues per year
IMPACT FACTOR 2017: 0.306
5-year IMPACT FACTOR: 0.492
CiteScore 2017: 0.50
SCImago Journal Rank (SJR) 2017: 0.414
Source Normalized Impact per Paper (SNIP) 2017: 0.531
Many recent studies estimate cost function parameters to measure the influence of capital-skill complementarity on changes in skill demand. This paper argues that standard cost function estimates assuming quasi-fixed capital systematically overestimate the effect of complementarity when subject to skill-biased technological change. While previous work has considered bias due to measurement error or general endogeneity concerns, this paper shows that upward bias results directly from cost minimizing behavior. I also develop a novel instrumental variables strategy based on the tax treatment of capital to more accurately measure the effect of complementarity. Although somewhat imprecise, the IV results support the model's prediction that the standard approach overestimates the effect of complementarity.
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