How Robust is the Capital-Skill Complementarity Hypothesis?

Abstract

This paper investigates the relation between substitution possibilities in manufacturing production between capital and two labor inputs, blue collar and white collar workers. Griliches found in 1969 that unskilled.labor was more easily substituted for by capital than skilled labor. Griliches called this capital-skill complementarity. The capital-skill complementarity hypothesis has implications for the aggregation of labor inputs as well as for employment of labor categories and income distribution between factors. This paper investigates the robustness of the capital-skill complementarity hypothesis on Swedish data by varying model assumptions concerning economies of scale and technological growth. Copyright 1992 by MIT Press.

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