Robotics, Skill-Biased Technology and Labor Shares: A Four-Factor Case

Focusing on a four-factor nested production functionNested production function that has two heterogeneous capitals, which are robot capitalRobot capital and traditional capitalTraditional capital, and two heterogeneous labors, which are skilled laborSkilled labor and unskilled laborUnskilled labor, this chapter compares the effects of the robot capital technologyRobot capital technology and skill-biased technological progressTechnological progress on wage inequalityWage inequality and labor sharesLabor share in both the short- and long-run. The main results show that in some relevant conditions, which are capital-skill complementarityCapital-skill complementarity and factor substitutability between robot capital and unskilled laborFactor substitutability between robot capital and unskilled labor, in the short-run, both robot capital technologyRobot capital technology and skill-biased technical changeSkill-biased technical change can increase wage inequalityWage inequality and decrease aggregate labor shareAggregate labor share. However, if robot technologyRobot technology cannot continue infinity in the long-run equilibriumLong-run equilibrium, skill-biased technical progress may provide more wage inequalitiesWage inequality and labor shareLabor share declining in the long-run.