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Unemployment in Europe: Swimming against the Tide of Skill-Biased Technical Progress without Relative Wage Adjustment

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  • Roeger, Werner

    (European Commission)

  • Wijkander, Hans

    ()
    (Dept. of Economics, Stockholm University)

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    Abstract

    The hypothesis that European unemployment is the rigid relative wage mirror-image of increased wage dispersion in the US is explored. The framework is a two sector –manufacturing and services- model with skilled and unskilled labor. A proxy for skill-biased technical progress (SBTP) is constructed from data on total factor productivity (TFP). Econometric analysis of the relationship between SBTP and aggregate unemployment shows that SBTP explains some 50% of the unemployment increase in major European countries since the early 1970s, but it does not explain US unemployment. The hypothesis is robust in that it is not rendered void by inclusion of alternative, mostly macroeconomic, explanatory variables.

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    Bibliographic Info

    Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2000:9.

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    Length: 40 pages
    Date of creation: 11 Apr 2000
    Date of revision:
    Handle: RePEc:hhs:sunrpe:2000_0009

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    Keywords: TBA;

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