We study capital-skill complementarity in a multi-sector framework featuring firm-specific, multi-factor production functions and allowing for firm-specific factor-price wedges. We characterize the elasticity of the skill premium to the price of capital equipment in terms of firm-level...

The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that...

This paper estimates the elasticity of substitution between capital and skill using variation across U.S. counties in immigration-induced skill mix changes between 1860 and 1930. We find that capital began as a q-complement for skilled and unskilled workers, and then dramatically increased its...

How will the emergence of ChatGPT and other forms of artificial intelligence (AI) affect the skill premium? To address this question, we propose a nested constant elasticity of substitution production function that distinguishes among three types of capital: traditional physical capital...

Wages have been spreading out across workers over time - or in other words, the 90th/50th wage ratio has risen over time. A key question is, has the productivity distribution also spread out across worker skill levels over time? Using our calculations of productivity by skill level for the U.S.,...

How worker productivity evolves with tenure and experience is central to economics, shaping, for example, life-cycle earnings and the losses from involuntary job separation. Yet, worker-level productivity is hard to identify from observational data. This paper introduces direct measurement of...

We develop a framework to estimate the aggregate capital-labor elasticity of substitution by aggregating the actions of individual plants, and use it to assess the decline in labor's share of income in the US manufacturing sector. The aggregate elasticity reflects substitution within plants and...

We estimate long-run elasticities of substitution between intermediate inputs for Indian manufacturing plants. India's trade liberalization in the early 1990s provides an ideal natural policy experiment, with permanent and heterogeneous tariff reductions inducing changes in relative prices which...

When explaining the declining labor income share in advanced economies, the macro literature finds that the elasticity of substitution between capital and labor is greater than one. However, the vast majority of micro-level estimates shows that capital and labor are complements (elasticity less...

In a recent paper, Ottaviano and Peri (2007a) report evidence that immigrant and native workers are not perfect substitutes within narrowly defined skill groups. The resulting complementarities have important policy implications because immigration may then raise the wage of many native-born...