This paper analyzes the impact of office machinery and computer capital (OCM) on the demand for heterogeneous labor. A system of static and dynamic input demand equations based on the quadratic and the Leontief cost function with OCM capital and general capital as quasi-fixed factors is derived and estimated. Using panel data on 35 West German industries, we find that an increase in the OCM capital stock increases the demand for workers with a university degree and, to a lesser extent, the demand for workers with a certificate from the dual vocational system. Unskilled workers, by contrast, do not benefit from the increase in the capital stock, particularly in the manufacturing sector. Accumulation of OCM capital has accounted for at least 70 percent of the growth of employment of university graduates between the period 1978-1994. Substitution and output effects as well as the effects of the increase in general capital play a minor role in explaining employment changes of highly skilled workers and mediumskilled workers. Price effects, however, are more important in explaining employment changes of unskilled workers.


skill-biased technological change, capital-skill complementarity