In this paper, using a production framework in which skilled and unskilled labor are imperfect substitutes, we analyze the time paths of the efficiencies of skilled and unskilled labor and their implications for wage inequality and economic growth. We find no evidence that supports the common view that there has been an acceleration in skilled biased technical change. Indeed, after 1973 the eff...

We show that labor search frictions are an important determinant of the cross-section of equity returns. In the data, sorting firms by loadings on labor market tightness, the key statistic of search models, generates a spread in future returns of 6% annually. We propose a partial equilibrium labor market model in which heterogeneous firms make optimal employment decisions under labor search fri...

Development accounting exercises generally assume that skilled and unskilled labor services are perfect substitutes. However, it is known that if labor services are imperfectly substitutable, this assumption might lead to an overestimation of uniform efficiency differences, and an underestimation of skilled labor efficiency differences. To quantify the importance of this mechanism, one needs to...