What is the technological Industry?

Question

What is the technological Industry?

Answer 1

The impact of technological change on the relationship between education and training is also considered. We define technological change as the implementation of new production processes into the workplace. In our empirical work we use various proxies to measure the rate at which these processes are implemented.

There are two mechanisms by which technological change will reduce investments in training. First, an increase in the rate of technological change is likely to accelerate the rate of obsolescence of human capital. According to human capital theory (e.g., Ben Porath, 1967), higher rates of obsolescence will reduce the optimal amount of investment in training at any point in time. Since general human capital is likely to be more immune to the introduction of new work processes, the rate at which an individual's stock of general knowledge and problem-solving skills depreciates will be less than the rate for specific, vocational skills. Technological change should, therefore, lead to a decrease in investments in specific training. The second mechanism by which technological change will reduce training is related to the fact that technological change increases the risk or uncertainty of investment in human capital (see Levhari and Weiss, 1974; and Williams, 1979). While this uncertainty effect impacts the decisions of both individuals and firms, if individuals are more risk averse than firms, the negative effect should be stronger for individuals' investments than firm investments.

Offsetting the negative effects of depreciation and uncertainty are two additional factors which work in the opposite direction. First, technological change might increase the value of time in training relative to its value in work. In that case, employers and workers will find it optimal to increase the amount of on-the-job training, in spite of the loss of time at work.