International Economics Seminar Series: Capital-Skill Complementarity in Firms and Aggregate Economy with Daniel Lashkari

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At the most recent International Economics Seminar, Danial Lashkari, an economist at the Federal Reserve Bank of New York, presented his paper “Capital-Skill Complementarity in Firms and in the Aggregate Economy.” In this work, Lashkari and his co-authors Giuseppe Berlingieri, Filippo Boeri, and Jonathan Vogel examine how capital investment interacts with worker skill to influence wage inequality.

Prior research has largely credited the rising wage gap between skilled and unskilled workers to advances in capital technology, which lower the cost of equipment and boost productivity – and thus demand – for skilled labor. However, much of that evidence comes from macro-level time series data, which may mask other potential explanations. To address this, the authors use detailed French firm-level data from 1994 to 2007 on output, equipment investment, trade, and employee records to test the predictions of their multi-sector model. They estimate that a 1% drop in the price of capital leads to a 0.06% rise in the skill premium (ratio of skilled to unskilled wages) in France.

Their results suggest that capital-skill complementarity plays a meaningful role in the demand for high-skilled labor, but only accounts for about a quarter of the overall increase. The authors conclude that most of the rise in the skill premium must be driven by skill-augmenting technical change that is not embedded in capital equipment.

The International Trade Seminar Series convenes leading economists and researchers to present frontier work on international trade theory and empirics. The series emphasizes rigorous methodological approaches and novel data applications to advance understanding of trade dynamics, firm behavior, and policy implications in a globalized economy. Its goal is to foster scholarly exchange and inform evidence-based trade policymaking.