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Skill complementarity in production technology: New empirical evidence and implications

Author

Listed:
  • Stoyanov Andrey

    (7991 York University, Toronto, Canada)

  • Zubanov Nick

    (122295 University of Konstanz, Konstanz, Germany)

Abstract

Danish manufacturing firm data reveal that 1) industries differ in within-firm worker skill (= wage) dispersion, and 2) within-firm skill dispersion positively correlates with firm productivity in industries with higher average skill dispersion. We argue that these patterns reflect technological differences between industries: firms in the “skill complementarity” industries profit from hiring similarly able workers, while the “skill substitutability” firms thrive on skill differences. Our study produces a robust, data-driven and theoretically validated classification of industries into the complementarity and substitutability groups, unveils hitherto unnoticed technological heterogeneity between industries within the same economy, and illustrates its importance through simulations.

Suggested Citation

  • Stoyanov Andrey & Zubanov Nick, 2022. "Skill complementarity in production technology: New empirical evidence and implications," German Economic Review, De Gruyter, vol. 23(2), pages 233-274, May.
    • Handle: RePEc:bpj:germec:v:23:y:2022:i:2:p:233-274:n:2
    DOI: 10.1515/ger-2020-0102
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    More about this item

    Keywords

    skill dispersion; complementarity; production technology; firm productivity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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