Skill Upgrading and Rigid Relative Wages: The Case of Danish Manufacturing

Jan Skaksen and Anders Sørensen

No 664, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Relative wages have been remarkably rigid for the last two decades in Danish manufacturing despite large shifts in relative employment from unskilled labor towards skilled and educated labor. Assuming capital-skill complementarity and fixed relative wages as a consequence of labor market institutions, we argue that skill upgrading is more pronounced during downturns than upturns. This prediction is supported by a high positive and significant correlation between changes in relative employment of skilled labor and changes in the unemployment rate. Furthermore, we show that international outsourcing has played an important role in explaining the shift in relative labor demand.

Keywords: rigid relative wages; skill upgrading; business cycle; outsourcing; skill biased technological changes (search for similar items in EconPapers)
JEL-codes: E32 F02 J31 J51 O39 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2002-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published as 'Skill Upgrading and Rigid Relative Wages' in: B.E. Journal of Macroeconomics: Contributions to Macroeconomics, 2005, 5(1), Art. 7

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