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Technological Change and the Education Premium in Canada: Sectoral Evidence

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It has been well documented that the education premium measured by the wage difference between university and high school graduates has remained constant over the past two decades in Canada. Despite this stable pattern at the aggregate level, skill-biased technology could have important implications for the inter-industry wage structure. In a multi-sector economy where technological innovations are skewed towards certain industries, imperfect labour mobility implies a positive relationship between the education premium and the technological change in industry. Using data from the Survey of Consumer Finance and the Labour Force Survey, the authors obtain empirical results that would appear to confirm this link: university graduates in research and development-intensive industries are better paid. Yet, this positive correlation is largely due to the fact that high-tech industries attract more professionals who are more educated than the average university graduate.

Topic(s): Labour markets
JEL Code(s): J, J3, J31, O, O3, O30