December 3, 2001
Urban Institute

Understanding how the introduction of new technology impacts firms and in turn impacts workers has increasingly become important in the past two decades — particularly understanding the dynamic consequences of firms' decision to invest in advanced technology such as computers. Yet little is known about this interaction — measures of human capital at the firm level have been very limited, detailed firm-level measures of technology are difficult to obtain in general and especially for service sector businesses, and longitudinal data on firms are not widely available. This paper uses new data which remedies many of these deficiencies to provide a detailed examination of these issues for all sectors of the economy — first by documenting how the demand for human capital has changed within and between businesses and then by using firm level data to examine the link between changes in technology and the demand for human capital. The authors take a broad view of changes in technology in this context, expressing an interest in observable changes in physical capital with an emphasis on the role of advanced technology such as computers and changes in intangible capital such as organizational and business practices.

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