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Exchange rate risk and the skill composition of labor

Author

Listed:
  • Richard Friberg

    (Stockholm School of Economics
    Norwegian School of Economics
    CEPR)

  • Mark Sanctuary

    (IVL Swedish Environmental Research Institute
    Stockholm University)

Abstract

This paper uses matched employer–employee data covering the universe of Swedish private sector firms 1998–2014 to examine the links between exchange rate risk and the skill composition of labor in firms. We use firm $$\times$$× export destination and firm $$\times$$× import origin data to calculate firm-level measures of real exchange rate risk and real effective exchange rates. Our main result is that firms facing higher exchange rate risk employ a higher share of skilled labor and that the effect is especially marked among trade intensive firms in manufacturing and in firms with fewer than 50 employees. This finding is consistent with theoretical models of flexible work systems that require higher skill levels as a way of responding to higher risk.

Suggested Citation

  • Richard Friberg & Mark Sanctuary, 2020. "Exchange rate risk and the skill composition of labor," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 287-312, May.
  • Handle: RePEc:spr:weltar:v:156:y:2020:i:2:d:10.1007_s10290-019-00363-0
    DOI: 10.1007/s10290-019-00363-0
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    More about this item

    Keywords

    Skill-biased organizational change; Exchange rate risk; Firm heterogeneity;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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