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Labour market miracle, productivity debacle: Measuring the effects of skill-biased and skill-neutral technical change

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  • Hutter, Christian
  • Weber, Enzo

Abstract

This paper examines the role of skill-biased and skill-neutral technical change for productivity and employment. Thereby, we explore the puzzling macro development in Germany, witnessing job miracle and productivity debacle in parallel. In the literature, skill-biased technical change (SBTC) is known as an important driving factor for labour markets. We measure SBTC using comprehensive micro data and construct a structural macroeconometric framework identified by long-run restrictions. The results show that weaker SBTC explains 69 percent of the productivity slowdown since the early 2000s. Skill-biased technology shocks have a negative and skill-neutral technology shocks a positive hours effect. Twenty-five percent of the hours upswing since 2005 can be explained by reduced pressure from SBTC. Moreover, we analyse routine-biased technical change (RBTC) and find productivity and hours effects comparable to SBTC. However, only the latter can explain the job miracle – productivity debacle puzzle, since RBTC does not flatten substantially in the 2000s.

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  • Hutter, Christian & Weber, Enzo, 2021. "Labour market miracle, productivity debacle: Measuring the effects of skill-biased and skill-neutral technical change," Economic Modelling, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001735
    DOI: 10.1016/j.econmod.2021.105584
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    3. Ulrike Unterhofer & Conny Wunsch, 2022. "Macroeconomic Effects of Active Labour Market Policies: A Novel Instrumental Variables Approach," Papers 2211.12437, arXiv.org.
    4. Santos, Anabela Marques & Barbero, Javier & Salotti, Simone & Conte, Andrea, 2023. "Job creation and destruction in the digital age: Assessing heterogeneous effects across European Union countries," Economic Modelling, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Productivity; Technology shocks; Skill bias; Hours worked; SVAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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