The economic literature widely recognizes that innovation and investments in new technologies constitute cornerstones for the performance of competitive companies and national economic growth. Innovation and accelerating technological developments, however, steadily change the nature of jobs, tasks and skill requirements. On one hand, technological innovation depreciates skills that are related to vintage technologies and increases the market value of skills related to modern technologies. On the other hand, excess supply of modern skills leads to an accelerated adoption of modern technologies. Moreover, technology change is generally considered to have caused the growing wage difference between high-skilled and low-skilled workers (wage polarisation) in recent decades, even if the labour supply of high-skilled workers has significantly increased at the same time.
This project goes beyond these previous empirical results and aims at understanding how a supply shift in response to a fundamental technological innovation translates into the observed polarized wage distribution. In detail, we investigate how workers with skills related to a vintage technology are affected by a supply increase of workers possessing modern skills. We refer to this supply shift as a skill shock for workers with vintage skills. Such a supply shift can either affect employment prospects of workers with vintage skills, workers with modern skills or both depending on the substitution and technology (endowment) effect. Workers with vintage skills may face a lower wage increase over time, a higher risk of unemployment and a lower probability of re-employment. Workers with modern skills may enjoy higher wage increases and better employment prospects. We aim to answer the relative importance of those adjustment channels by exploiting a quasi-experimental design.