Kiel Working Papers, Kiel Institute for World Economics
No 923:
Sectoral Value Added Prices, TFP Growth, and the Low-Skilled Wage in High-Income Countries
Matthias Lücke
Abstract: This econometric analysis investigates the impact of
changes in sectoral value-added prices and total factor productivity (TFP)
on the equilibrium relative wage of low-skilled workers in eleven
high-income countries. The key finding is that TFP growth mandated an
increase in the unskilled wage, relative to the remuneration of human
capital, during the 1970s, but a decrease during the 1980s. This is
consistent with the observation that, in most sample countries, the
relative wage and employment opportunities of low-skilled workers tended to
improve until about 1980, but have deteriorated since then. While the
regression results suggest that technological change played a large role in
shifting labour demand against low-skilled workers, this conclusion is
qualified because the empirical evidence is also compatible with product
upgrading and outsourcing of low-skill intensive production activities to
low-income countries.
JEL-Codes: F16; (follow links to similar papers)
41 pages, April 1999
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