Technical Progress in a Dynamic Input-Output Model with Heterogenous Labour

This paper introduces a dynamic input-output model with different skillgroups of workers. Exogenous technical progress is introduced as sector and skill-specific labour input coefficients are gradually falling over time. We discuss the effects of this kind of technological progress on the changing structure of the economy and the labour market performance of skilled and unskilled workers. As prices do not adjust immediately to unit costs, temporary rents emerge which are invested and thus enables the economy to grow at a faster than the equilibrium growth rate. Further, the sector and skill-specific technical progress implies changes in relative prices over time which then cause consumption demand changes due to substitution effects in the demand structure.