Skill-biased technological change and intergenerational education mobility

Abstract

This paper analyses the impact of skill-biased technological change (SBTC) on intergenerational education mobility. I set up an SBTC model with an overlapping-generations framework, where high and low-income households invest in their children’s skill development. Technology incentivizes these investments by raising the skill-premium and improving life-skills; it constrains investments by increasing inequality. I find that, for SBTC shocks within a critical range, intergenerational investments by both household-types are higher in the new steady-state, with the relative increase being larger for the low-income group. I use cross-U.S. commuting-zone data to examine if education mobility outcomes are better in locations characterized by (1) higher STEM-shares, and (2) larger shifts in the demand of relative skills. I empirically find that children from low-income households are not only more likely to attend college if they live in high-tech areas, but this likelihood increases by a larger margin compared to children from higher-income households.