1 / 7

The Impact of Computer Use on Wages

The Impact of Computer Use on Wages. Personal computers were first introduced in the late 1970s and began to diffuse rapidly in the early 1980s Since then, computers have had a dramatic impact on the way we live and work

vicki
Download Presentation

The Impact of Computer Use on Wages

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Impact of Computer Use on Wages • Personal computers were first introduced in the late 1970s and began to diffuse rapidly in the early 1980s • Since then, computers have had a dramatic impact on the way we live and work • It seems reasonable that individuals who are capable of working with a computer on the job earn a wage premium for this ability • Suppose we are interested in estimating the impact of individual computer use on wages • This impact is likely to vary depending on when we observe the individual; computer use was likely associated with a larger wage premium in the 1980s than more recently • The impact on wages also likely depends on the industry and occupation the individual works in

  2. Data We can measure the following variables at the individual level: • The natural log of the individual’s hourly wage • A dummy variable that takes the value 1 if the individual uses a computer on the job • A dummy variable that indicates whether the individual is in a high computer use industry • A dummy variable that indicates whether the individual is in a high computer use occupation • A measure of the individual’s work experience (age) We observe three cross sections of individuals measured at different points in time (1984, 1993, 2001)

  3. Testable Hypotheses Using this data, we can test several hypotheses about the impact of computer use on wages: Does the impact of individual computer use on wages • Differ by year? • Depend on whether the individual is in a high-usage industry? • Depend on whether the individual is in a high-usage occupation? • Depend on how experienced the individual is? We can also test other types of hypotheses, such as whether the effect of experience on wages depends on the type of industry or occupation or whether it varies over time

  4. Tashiro’s Approach • Tashiro interacts industry-occupation dummies to generate four categories: HIHO, HILO, LIHO, LILO • In the regression analysis, one dummy needs to be dropped to avoid perfect multicollinearity; she drops LILO • She includes several additional controls and examines more years, but the basic approach is to estimate a very general specification that considers interactions between as many variables as possible and coefficients that vary by year and then test restrictions such as: • The effect of computer use on wages does not vary over time • The effect does not depend on industry or occupation type • The effect of experience does not depend on whether the individual uses a computer at work

  5. Testing Hypotheses • The econometric techniques for testing restrictions are standard in this context, but figuring out exactly what restriction is required to test a particular hypotheses can be tricky • For example, if the independent variables include a dummy for computer use, an interactive effect between this dummy and an industry-occupation dummy, and an interactive effect between the computer use dummy and the experience effect, how do you test the hypothesis that computer use has no impact on wages? • Examining the t stat on the computer use dummy alone is insufficient; a proper test must restrict the interactive effects as well

  6. Reporting Results • Similarly, one must be careful when reporting results • For example, what is the wage premium associated with computer use in a high usage industry/high usage occupation? • The correct comparison is between an individual in a high usage industry/occupation who does not use a computer and one who does, but again examining the effect of the computer use dummy alone is insufficient • The effect is given by the computer use effect plus the effect of the computer use dummy interacted with the high usage industry/occupation effect

  7. Unmeasured Skill and Bias • One problem with this type of regression analysis is that the computer use effect may not be an accurate measure of the premium associated with computer use • This is a version of the well-known selection problem that we will discuss later in the course • Essentially, individuals are not randomly (exogenously) selected into computer users and non-computer users; some choose to use computers and others choose not to • Thus, the estimated computer use effect could reflect in part an unmeasured effect of worker skill rather than the effect of using a computer per se • However, as long as this bias does not vary over time, we should still be able to test hypotheses about how the impacts of computer use on wages vary over time (by year)

More Related