Information and communication technology innovations and labor hours: A business cycle analysis

Abstract

Abstract This paper examines the impact of changes in information and communication technologies (ICTs) on skilled and unskilled labor at the business cycle frequency. To achieve this, we construct aggregate hours series for both labor groups using the monthly outgoing rotation group of the Current Population Survey from 1994 to 2023. Our empirical analysis, conducted with a structural vector autoregressive model, shows that the working hours of both groups respond positively to ICT innovations with similar magnitudes. We demonstrate that our findings are consistent with a dynamic stochastic general equilibrium model in which ICT capital complements both skilled and unskilled labor, and suggest a plausible range of elasticity of substitution between capital and labor.