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Trade and technological explanations for changes in sectoral labour demand in OECD economies

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  • Gerry Boyle
  • Pauline McCormack

Abstract

This paper sets out to establish the main determinants of variations in the demand for aggregate labour in manufacturing and service sectors (22) for a cross-section of OECD countries (14). A relatively new panel data set is employed in the analysis, the OECD's International Sectoral Data Base. Preliminary analysis revealed that the 'within' sector variation in the wage share dominated overall variation for most countries and time periods. A separate dynamic model was thus generated to explain the 'within' sector variation in the wage share. This model contained real wages, output, the capital stock, technological change (total factor productivity) and trade (the imports to value-added ratio) as independent variables. In addition the wage level was also interacted with these explanatory variables on the presumption that skill is positively correlated with the level of wages. Because of the potential for simultaneity bias, estimation was conducted by IV and OLS. The main findings were that the capital stock and technological change were the main determinants of shifts in labour demand. While some countries reported the trade variable as significant its influence was only of slight importance in most cases. The interaction terms proved to be significant in a large number of countries. Some evidence was found that capital and technological were complementary with skill. Overall it was found that broad agreement existed across countries in the factors which influence labour demand despite considerable differences in the cross-country nature of labour market institutions.

Suggested Citation

  • Gerry Boyle & Pauline McCormack, 2002. "Trade and technological explanations for changes in sectoral labour demand in OECD economies," Applied Economics, Taylor & Francis Journals, vol. 34(5), pages 617-635.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:5:p:617-635
    DOI: 10.1080/00036840110048474
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    References listed on IDEAS

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    1. Machin, Steve & Van Reenen, John, 1996. "Technology and Changes in Skill Structure: Evidence from an International Panel of Industries," CEPR Discussion Papers 1434, C.E.P.R. Discussion Papers.
    2. Steiner, Viktor & Wagner, Kersten, 1997. "Relative Earnings and the Demand for Unskilled Labor in West German Manufacturing," ZEW Discussion Papers 97-17, ZEW - Leibniz Centre for European Economic Research.
    3. Matthew J. Slaughter, 1997. "International Trade and Labor-Demand Elasticities," NBER Working Papers 6262, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Asier Minondo & Gloria Rubert, 2006. "The effect of outsourcing on the demand for skills in the Spanish manufacturing industry," Applied Economics Letters, Taylor & Francis Journals, vol. 13(9), pages 599-604.
    2. Kang-Shik Choi & Jinook Jeong, 2007. "Does unmeasured ability explain the wage premium associated with technological change?: Quantile regression analysis," Applied Economics, Taylor & Francis Journals, vol. 39(9), pages 1163-1171.
    3. Rosario Cervantes & Gerardo Fujii, 2012. "The Mexican trade liberalization process and its net effects on employment: 1988-2004," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 9(2), pages 81-97, Julio-Dic.
    4. Kerstin Hotte & Melline Somers & Angelos Theodorakopoulos, 2022. "Technology and jobs: A systematic literature review," Papers 2204.01296, arXiv.org.

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