Sectoral Value Added Prices, TFP Growth, and the Low-Skilled Wage in High-Income Countries

Kiel Working Paper No. 923

43 Pages Posted: 24 Jun 1999

See all articles by Matthias Luecke

Matthias Luecke

The Kiel Institute for the World Economy; CASE - Center for Social and Economic Research

Date Written: April 1999

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 Classification: F16, O33

Suggested Citation

Lücke, Matthias, Sectoral Value Added Prices, TFP Growth, and the Low-Skilled Wage in High-Income Countries (April 1999). Kiel Working Paper No. 923, Available at SSRN: https://ssrn.com/abstract=166308 or http://dx.doi.org/10.2139/ssrn.166308

Matthias Lücke (Contact Author)

The Kiel Institute for the World Economy ( email )

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