Timothy F. Bresnahan Department of Economics Stanford, CA Timothy.Bresnahan@stanford.edu Erik Brynjolfsson MIT Sloan School of Management Cambridge, MA firstname.lastname@example.org Lorin M. Hitt University of Pennsylvania, Wharton School Philadelphia, PA email@example.com First Draft: January, 1998 This Draft: February, 1999 We thank Gary Burtless, Margaret Blair, Alan Krueger, and participants in the Brookings/MIT Human Capital Conference for valuable comments. This research has been generously supported by the MIT Center for Coordination Science, the MIT Industrial Performance Center, the National Science Foundation (Grants IIS-9733877 and IRI-9700316) and the Stanford Computer Industry Project under grants from the Alfred P. Sloan Foundation and NationsBanc Montgomery Securities. Incon Research, the Center for Survey Research, Computer Intelligence Infocorp and Informationweek provided or helped to collect essential data.
Abstract Recently, labor demand has shifted in favor of high-wage, high-skill work, contributing to a substantial rise in income inequality in the United States. We argue that information technology (IT) and associated changes in work organization are important causes of this shift. IT is among the most important technological changes affecting the economy and employers who use IT usually co-invent new approaches to workplace organization and new product and service offerings. IT and the co-inventions together change the mix of skills that employers demand, often substituting computers for low skill work while complementing work that requires certain cognitive and social skills. We show how this creates a four-way complementary system consisting of IT, new work organization, new levels of service quality, and high-skill labor. Our argument is supported by firm-level data linking several indicators of IT use, workplace organization, and the demand... [continues]
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