The Skill-Biased Effects of Exchange Rate Fluctuations

KOF Working Paper No. 385

50 Pages Posted: 13 Jun 2015

See all articles by Michael Siegenthaler

Michael Siegenthaler

KOF Swiss Economic Institute

Boris Kaiser

University of Bern

Date Written: June 11, 2015

Abstract

This paper examines the linkages between real exchange rate movements and firms’ skill demand. Real exchange rate movements may affect unskilled workers differently than skilled workers because of skill-specific adjustment costs, or because exchange rates lead to changes in relative factor prices and firms’ competition intensity. Using panel data on Swiss manufacturers, we find that an appreciation increases high-skilled and reduces low-skilled employment in most firms, while total employment remains roughly unchanged. We find evidence that exchange rates influence firms’ skill intensity because they affect outsourcing activities, innovation efforts, and firms’ compensation schemes.

Keywords: Labor Demand, Skill Intensity, Employment, Real Exchange Rates, Firms’ Foreign Exposure

JEL Classification: E24, F16, F31

Suggested Citation

Siegenthaler, Michael and Kaiser, Boris, The Skill-Biased Effects of Exchange Rate Fluctuations (June 11, 2015). KOF Working Paper No. 385. Available at SSRN: https://ssrn.com/abstract=2617613 or http://dx.doi.org/10.2139/ssrn.2617613

Michael Siegenthaler (Contact Author)

KOF Swiss Economic Institute ( email )

Zurich
Switzerland

Boris Kaiser

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

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