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Trade, technical change, and labour market adjustment

  • Heitger, Bernhard
  • Stehn, Jürgen
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    The paper empirically examines three possible reasons for the high and rising unemployment of low-skilled employees in Germany: (i) an upsurge in interindustry trade, (ii) a skill-biased technical change, and (iii) a failure of labour market adjustment. The empirical analyses indicate that an exogenous wage-setting process as well as a bundle of factors, including a skill-biased technical and structural change, have contributed to the decline in relative demand for low-skilled employees in Germany. Thus, economic policy in Germany should focus on improving the employability of workers in the lower segment of the labour market and on raising the adjustment flexibility, above all the flexibility of the wage structure, of the German labour market.

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    File URL: http://econstor.eu/bitstream/10419/3101/1/Ste_Trade_Technical_Change.pdf
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    Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 3101.

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    Date of creation: 2003
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    Handle: RePEc:zbw:ifwkie:3101
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    1. J. Michael Orszag & Dennis J. Snower, 1996. "A Macro Theory of Employment Vouchers," Archive Discussion Papers 9605, Birkbeck, Department of Economics, Mathematics & Statistics.
    2. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    3. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
    4. Snower, Dennis J, 1994. "Converting Unemployment Benefits into Employment Subsidies," American Economic Review, American Economic Association, vol. 84(2), pages 65-70, May.
    5. Falk, Martin & Koebel, Bertrand M., 1997. "The Demand of Heterogeneous Labour in Germany," ZEW Discussion Papers 97-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
    7. Sachs, Jeffrey D & Shatz, Howard J, 1996. "U.S. Trade with Developing Countries and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 234-39, May.
    8. 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, vol. 109(2), pages 367-97, May.
    9. Bernhard Heitger & Jürgen Stehn, 1990. "Japanese Direct Investments in the EC - Response to the Internal Market 1993?," Journal of Common Market Studies, Wiley Blackwell, vol. 29(1), pages 1-15, 09.
    10. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-14, May.
    11. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
    12. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
    13. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
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