The Loss of Production Work: Identification of Demand Shifts Based on Local Soviet Trade Shocks

Elias Einiö

No 61, Working Papers from VATT Institute for Economic Research

Abstract: This paper examines changes in the structure of labor demand in panel data on Finnish manufacturing plants. I exploit general equilibrium effects on unit labor costs in local labor markets induced by the 1990 collapse of Fenno-Soviet trade to identify labor demand schedules for plants producing for the non-Soviet markets, which were not directly affected by the fall of Soviet-import demand. The estimated model implies that the relative demand for noninterpersonal, manual task-intensive production labor activities is stagnant in the 1990s, but starts to decline rapidly in the early 2000s, coinciding with a surge of imported intermediate inputs. In this period, the industry patterns of the shift also begin to diverge. Offshoring and ICT explain both one-third of the overall shift.

Keywords: Labor demand, Occupations, Tasks, Technical change, ICT, Trade, Offshoring, Manufacturing, Panel data, Labour market, Työmarkkinat, Labor market and policies promoting economic growth, Työmarkkinat ja kasvua tukeva politiikka, F160 - Trade and Labor Market Interactions, J230 - Employment Determination; Job Creation; Demand for Labor; Self-Employment, J240 - Human Capital; Skills; Occupational Choice; Labor Productivity (Formal Training Programs; On-the-Job Training), O330 - Technological Change: Choices and Consequences; Diffusion Processes (includes impact on production, welfare, income distribution, international competitiveness, military power, measurement, and case studies; international transfer of technology), (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cis
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