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The Skill‐biased Effects of Exchange Rate Fluctuations

Author

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  • Boris Kaiser
  • Michael Siegenthaler

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.
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Suggested Citation

  • Boris Kaiser & Michael Siegenthaler, 2016. "The Skill‐biased Effects of Exchange Rate Fluctuations," Economic Journal, Royal Economic Society, vol. 0(592), pages 756-780, May.
    • Handle: RePEc:wly:econjl:v::y:2016:i:592:p:756-780
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    File URL: http://hdl.handle.net/10.1111/ecoj.2016.126.issue-592
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    Cited by:

    1. Jinying Li & Fan Wu & Jinchao Li & Yunqi Zhao, 2017. "Research on Risk Evaluation of Transnational Power Networking Projects Based on the Matter-Element Extension Theory and Granular Computing," Energies, MDPI, vol. 10(10), pages 1-19, October.
    2. Peter H. Egger & Johannes Schwarzer & Anirudh Shingal, 2018. "Labour market effects of currency appreciation: The case of Switzerland," RSCAS Working Papers 2018/30, European University Institute.
    3. Johnston, David W. & Shields, Michael A. & Suziedelyte, Agne, 2017. "World Commodity Prices, Job Security and Health: Evidence from the Mining Industry," IZA Discussion Papers 11251, IZA Network @ LISER.
    4. Arthur Korus, 2016. "Currency Overvaluation and R&D Spending," EIIW Discussion paper disbei218, Universitätsbibliothek Wuppertal, University Library.
    5. He, Xinming & Rizov, Marian & Zhang, Xufei, 2022. "Workforce size adjustment as a strategic response to exchange rate shocks: A strategy-tripod application to Chinese firms," Journal of Business Research, Elsevier, vol. 138(C), pages 203-213.
    6. 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.
    7. Fu, Liang & Ho, Chun-Yu & Wei, Xiao & Zhang, Xiaoli, 2025. "Real exchange rate, financial constraints and product innovation: Evidence from China," Journal of International Money and Finance, Elsevier, vol. 159(C).
    8. Piera Bello, 2017. "Exchange rate fluctuations and border crossings: evidence from the Swiss-Italian border," IdEP Economic Papers 1701, USI Università della Svizzera italiana.
    9. Thompson, Mark James & Woerter, Martin, 2020. "Competition and invention quality: Evidence from Swiss firms," Technological Forecasting and Social Change, Elsevier, vol. 156(C).
    10. Matthias Flückiger & Christian Rutzer & Rolf Weder, 2016. "Die Schweizer Wirtschaft zwischen Hammer und Amboss: Eine Analyse der "Franken-Schocks" 2010/11 und 2015," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(03), pages 95-133, December.
    11. Piera Bello, 2021. "The environmental cost and the accident externality of driving: Evidence from the Swiss franc's appreciation," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1440-1458, July.
    12. Dario Fauceglia, 2020. "Exchange rate fluctuations and quality composition of exports: Evidence from Swiss product‐level data," The World Economy, Wiley Blackwell, vol. 43(6), pages 1592-1618, June.
    13. Banerjee, Purna & Mazumder, Debojyoti, 2025. "Skill differentiated effects of exchange rates on job dynamics," Economic Modelling, Elsevier, vol. 151(C).
    14. Izumi Yokoyama & Kazuhito Higa & Daiji Kawaguchi, 2018. "Adjustments of regular and non-regular workers to exogenous shocks: Evidence from exchange rate fluctuation," Bank of Japan Working Paper Series 18-E-2, Bank of Japan.
    15. Ester Faia, 2017. "Competitiveness, labor market institutions, and monetary policy," World of Labour, LISER, pages 383-383, August.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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