Structural Changes in the Demand for Labor |
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Authors: | D.A.G. Draper A.J.G. Manders |
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Affiliation: | (1) The Netherlands Bureau for Economic Policy Analysis, CPB, The Hague |
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Abstract: | This paper investigates why labor demand has shifted away from low-skilled toward high-skilled labor in The Netherlands. We focus on the role of changes in relative wages and technological progress. A flexible functional form, proposed by Diewert and Wales, the Symmetric Generalized McFadden cost function, is estimated for the exposed and sheltered sectors. The estimates are based on time-series data for the period 1972–1993, which recently became available. Labor-saving technological change explains most of the displacement of low-skilled workers. The computed elasticities suggest that substitution between labor as a whole and capital is small. However, substitution plays a modest role in the shift from low-skilled toward high-skilled labor, especially in the sheltered sector. Skill-capital complementarity seems relevant in both sectors. |
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Keywords: | labor demand low-skilled labor high-skilled labor relative wages technical progress |
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