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The Impact of New Technologies on the Demand for Heterogenous Labour: Empirical Evidence from the German Business-Related Services Sector

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  • Kaiser, Ulrich

Abstract

The impact of technology on the demand for heterogeneous labor is controversely discussed throughout the literature. New technology which is said to favor high skilled labor and to substitute low skilled labor is often considered as the main reason for the decline in relative demand for low skilled labor. While most analyses focus on manufacturing industries, this paper presents empirical evidence that technological skill bias is also present for business related services, an increasingly important sector in the German economy. Cross-sectional data from an innovation survey and panel data from a quarterly business survey in the service sector are used in the empirical investigation. The data allow to directly distinguish among five different skill groups. The micro-level data also allow the analysis of shifting employment patterns for a single economic unit. Ordered probit models are utilized to study the determinants of skill shifts in business related services. It turns out that investment in information and communication technologies is a complement of university graduates and a substitute for workers with completed vocational training. New capital goods are substitutive to low unskilled labor whereas the demand for technically skilled labor remains unaffected by investment decisions. A puzzling finding is that labor costs do not play an important role in the demand for university graduates, technically skilled and unskilled labor but turn out to be highly significant for skilled labor. Also, expected foreign competition has a significantly positive effect on the demand for both university graduates and unskilled labor alike while present foreign competition is only positively significant in the demand for university graduates. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 98-26.

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Date of creation: 1998
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Handle: RePEc:zbw:zewdip:9826

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Keywords: skill-biased technological change; capital-skill complementarity; panel data; service sector; ordered probit model;

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References

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  1. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers, Centre for Economic Performance & Institute of Economics 25, Centre for Economic Performance & Institute of Economics.
  2. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August.
  3. Ann P. Bartel & Nachum Sicherman, 1995. "Technological Change and the Skill Acquisition of Young Workers," NBER Working Papers 5107, National Bureau of Economic Research, Inc.
  4. Brouwer, Erik & Kleinknecht, Alfred & Reijnen, Jeroen O N, 1993. "Employment Growth and Innovation at the Firm Level," Journal of Evolutionary Economics, Springer, Springer, vol. 3(2), pages 153-59, May.
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  6. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1169-1213, November.
  7. Stephen Machin & Annette Ryan & John Van Reenen, 1996. "Technology and changes in skill structure: Evidence from an international panel of industries," IFS Working Papers, Institute for Fiscal Studies W96/06, Institute for Fiscal Studies.
  8. Peter Cappelli, 1993. "Are skill requirements rising? Evidence from production and clerical jobs," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(3), pages 515-530, April.
  9. FitzRoy, Felix & Funke, Michael, 1995. "Capital-Skill Complementarity in West German Manufacturing," Empirical Economics, Springer, Springer, vol. 20(4), pages 651-65.
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  11. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  12. Falk, Martin & Koebel, Bertrand M., 1997. "The Demand of Heterogeneous Labour in Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 97-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Ernst R. Berndt & Catherine J. Morrison & Larry S. Rosenblum, 1992. "High-Tech Capital Formation and Labor Composition in U.S. Manufacturing Industries: An Exploratory Analysis," NBER Working Papers 4010, National Bureau of Economic Research, Inc.
  14. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  15. Brouwer, E. & Kleinknecht, Alfred & Reijnen, J.O.N., 1993. "Employment growth and innovation at the firm level," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5662246, Tilburg University.
  16. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
  17. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, American Economic Association, vol. 59(4), pages 457-71, Part I Se.
  18. Levy, Frank & Murnane, Richard J, 1996. "With What Skills Are Computers a Complement?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 258-62, May.
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Cited by:
  1. Jacobebbinghaus, Peter & Zwick, Thomas, 2001. "New technologies and the demand for medium qualified labour in Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 01-12, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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