Skill-intensive Industries Research Articles

The Structure of Tariffs and Long-Term Growth

We show that the “skill bias” of a country's tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-intensive industries. However, this only accounts for a quarter of the total correlation between skill-biased tariffs and growth. Turning to alternative explanations, we extend the standard Grossman-Helpman “protection-for-sale” model and show how the skill bias of tariffs can reflect the extent of domestic rent-seeking activities in the economy. We provide evidence that the remaining variation is explained by this endogeneity. (JEL D72, F13, F43, O17, O19, O24, O47)

City size and skill intensity

Many have theorized that the productivity of human capital increases with city size. If this were true, one would expect production in large cities to be more skill intensive than in small cities, even within industry. This paper uses data on the occupational mix at establishments to test whether skill intensity is greater in large cities. Establishments in metropolitan areas with population above two million use a more skill intensive mix of workers than comparable establishments in metropolitan areas with population below one million. The differences in skill intensity are not the same in all industries; establishments in relatively skill intensive industries are even more skill intensive in large MSAs. These results support theories that suggest that the productivity gains from agglomeration are larger for skilled labor than unskilled labor.

How Offshoring Can Affect the Industries' Skill Composition

While most offshoring literature focus on the effects on relative wages, other implications do not receive the necessary attention. This paper investigates effects on the industries’ skill ratio. It summarizes the empirical literature, discusses theoretical findings, and provides first empirical evidence for Germany. As results show, effects are mainly driven by the industry where offshoring takes place. In high skill intensive industries, the high skill labor ratio increases (vice versa for low skill intensive industries). Since this result is inline with other empirical findings but seems to contradict with theory, the paper additionally discusses possible explanations.

Wage differentials and the spatial concentration of high‐technology industries

AbstractWorkers in high‐tech cities earn raw wages that are on average 17% higher than wages of workers in other cities. Using a large sample from the 5% PUMS of the 2000 Census of Population, this paper presents econometric evidence of a ‘tech‐city wage premium’ of approximately 4.6% that is not the result of higher‐ability people self‐selecting to live in high‐tech cities, but rather the result of high‐tech cities actually making workers more productive. Although knowledge spillovers are difficult to assess, we use the concepts of the new economic geography and evidence from empirical studies of high‐technology regions, such as Silicon Valley and Austin, Texas, to support the view that workers who live in high‐tech cities might be more productive because they benefit from a larger supply of knowledge spillovers than workers who live in low‐tech cities.ResumenLos trabajadores de ciudades que cuentan con alta tecnología ganan salarios brutos que son un 17% más alto en promedio que los de trabajadores de otras ciudades. Utilizando una muestra grande del 5% de PUMS del Censo Poblacional del año 2000, este artículo presenta pruebas econométricas de una “prima salarial por ciudad‐tecnológica” de aproximadamente un 4.6% que no es una consecuencia de personas más cualificadas que eligen vivir en ciudades‐tecnológicas, sino más bien el resultado de ciudades tecnológicas que de hecho logran que los trabajadores sean más productivos. Aunque los spillovers de conocimiento son difíciles de evaluar, utilizamos los conceptos de la nueva geografía económica y pruebas de estudios empíricos de regiones de alta tecnología como Silicon Valley y Austin, Texas, para apoyar la opinión de que los trabajadores que viven en ciudades de alta tecnología podrían ser más productivas porque se benefician de un suministro mayor de spillovers de conocimiento que los trabajadores de ciudades de baja tecnología.

R&D, knowledge spillovers and company productivity performance

Using company accounts data for 5 countries (US, UK, Japan, France and Germany) we analyse the relationship between intangible assets and productivity. We integrate the company data with industry information on tangible and intangible investments and skill composition of the labour force. The industry data are summarised in two different taxonomies, factor and skill intensive groups, which account for differences in the knowledge intensity and innovative activities within sectors. The results provide evidence of higher productivity in R&D and skill intensive industries. This can be interpreted as evidence in favour of the presence of spillover effects.

Labor Market Effects of International Outsourcing: How Measurement Matters

As regards labor market effects of International Outsourcing, empirical studies have difficulties in confirming theoretical results. The use of different indices adds to the puzzle. The paper examines whether measurement differences are one reason for the mismatch between empirical and theoretical findings. In fact, considering the properties of various outsourcing indices and applying a panel data estimation of the effects on the within industries' wage gap in Germany, theory and empirics can be reconciled: while the wage gap increases in the aggregate, the service sector and the high skill intensive industries, it decreases in the low skill intensive industries - which is in line with theoretical findings by Arndt (1997, 1998).

Occupational structures across 25 EU countries: the importance of industry structure and technology in old and new EU countries

This article analyzes the occupational structure of 25 European Union countries during the period 2000–2004. Shift-share analyses are used to decompose cross-country differences in occupational structure into within sector and between sectors effects. The static analysis for 2004 shows that the new member countries employ a lower share of skilled workers because their industry structure is biased towards less skill-intensive industries and because they use fewer skills within industries. The differences in the shares of (high-skilled) non-production workers are dominated by the between (industrial) effect. In contrast, the dynamic analysis of 2000–2004 showed that changes in the share of high-skilled non-production workers are mostly driven by within sector changes, which are probably related to skill-biased technological change. Similar trends in the countries’ within effects support the catch-up of the new member countries’ skills demand, while the structural developments that could equalize the industry mix of the new and old member countries are related to increased domestic demand and will probably take time.

Economic Performance of Gujarat in Recent Times

The growth and development of Gujarat one of India's leading industrial states is examined and the reasons for the relatively high growth are presented. Despite high growth Gujarat faces limitations emanating from skills constraint to attract skill intensive industries.

The Emerging Offshore Software Industries and the United States Economy

The possibility that a significant number of skill-intensive service jobs might move from the United States to developing countries has generated widespread recent concern. The newness of the phenomenon has led to rampant speculation, by academics, in the press, and on Wall Street, about the potential scope of such "offshoring" and its likely impact on the U.S. economy.1 Drawing from Arora and Gambardella (2004 and 2005), this paper attempts to shed some light on the development of offshoring by focusing on one of the first skill-intensive industries to move to low-wage economies, namely software. I first provide an overview of the global software industry. Next I discuss how three emerging-market countries—India, Ireland, and Israel (the "3 I's")—separately developed dynamic software industries that in 2001 together accounted for more than $15 billion in exports. In the next section I examine the impact of this offshoring on the U.S. economy, as well as future prospects for offshoring software R&D, concluding that this is unlikely. Finally, I compare the software industry's experience with that of other skill-intensive industries. The Global Software Industry The first task in describing the global software industry is to define what is meant by software industry. At the risk of oversimplification, software-related [End Page 399] activities generally fall into one of three categories: design, coding, or maintenance. Design, which translates approximately into R&D and product development, has the highest value added of the three activities. Coding and maintenance may be thought of as analogous to production in other industries and consequently entail lower-end tasks. As discussed in more detail below, most of the functions offshored (especially to India) involve production, while design has tended to remain local. Click for larger view Table 1 Software Employment by Industry in the United States, 2001 A correlate distinction concerns the difference between people who work in the software industry and those who work with software. In the United States in 2001, for example, two out of three people who wrote computer code worked for companies outside the computer equipment or software services industries (see table 1). These people work in universities, for financial funds, and in myriad other sectors that rely heavily on information and computer technology (ICT). Moreover, the bulk of the demand for computer-related outsourcing comes from firms outside the "core" industry. Roughly speaking, banks outsource coding and maintenance; Microsoft keeps its product design activities in-house. Thus, in studying the impact of offshoring, the first place to look is in software occupations outside the software industry. Of course, the core industry is still quite large, and it is also the appropriate level of analysis for describing the rise of providers in low-income countries that focus exclusively on software-related services. Table 2 gives summary statistics by country for five "newcomers" to the software development process as well as for the three most important industrialized countries. The United States dominates the global market; it had $200 billion in sales in 2002. It is important to note that this figure excludes software written and used in-house. Although in-house-produced [End Page 400] software is difficult to measure, estimates suggest that, if included, it could constitute an additional $300 billion in value. Click for larger view Table 2 Summary Statistics for the Software Industry, 2002 or latest available figures Four of the five newcomers have similarly sized software sectors, as measured by sales revenue; Israel's sector is about half their size (see table 2).2 However, three of the newcomers, India, Ireland, and Israel, earn roughly three-quarters of their revenue from exports. Accordingly, the 3 I's have received most of the attention as offshore locales. Documenting how these three countries have developed their industries constitutes most of the following section. First, two more comments are in order on the present state of the software industry. The... collapse You are not currently authenticated. If you would like to authenticate using a different subscribed institution or have your own login and password to Project MUSE Authenticate

Why Does Educational Attainment Differ Across U.S. States?

The fraction of persons holding a college degree differs nearly two-fold across U.S. states. This paper documents data related to state educational attainment differences and explores possible explanations. It shows that highly educated states employ skillbiased technologies, specialize in skill-intensive industries, but do not pay lower skill premia than do less educated states. Moreover, measures of urbanization and population density are positively related to educational attainment. Theories based on agglomeration economies offer natural explanations for these observations.

Skill-Biased Technological Change in Denmark: A Disaggregate Perspective

In this paper, we provide an industry-level analysis of skill-biased technological change (SBTC) in Denmark over the last two decades. The analysis shows that SBTC has varied considerably across industries, and traditionally large Danish industries have experienced relatively less SBTC. This may partly explain why wage inequality between skilled and less skilled has risen less in Denmark than in other countries. We also find that SBTC has been concentrated in already skill-intensive industries. This contains important information about future labour requirements, as the relative importance of these industries must be expected to grow, thereby reinforcing the shift in demand for skilled labour.

Trade and the Skill Premium in Developing Countries: The Role of Intermediate Goods and Some Evidence from Peru

Abstract: The rise in income inequality in developing countries after trade liberalization has been a puzzle for trade theory, which predicts the opposite effect. The authors present a model with imported intermediate goods in which the relative wages of skilled labor can rise due to higher imports of inputs or due to skill-biased technological change. The evidence from Peru in the post-liberalization phase in the early 1990s supports the skilled-biased technological change hypothesis. The authors find that most of the decrease in the blue-collar wage share in the manufacturing industries can be explained by the increase in machinery imports that followed liberalization, suggesting that the skilled-biased technology is embodied in imported machinery. JEL classification: F16, J31, 033, 054, 015 Key words: income distribution, machinery reports, trade liberalization, wage differentials, Peru 1. Introduction Since the 1980s, the occurrence of increasing wage inequality along with rising volume of trade in developed countries has led to a debate about the impact of international trade on the changing wage structure. While economists argue about the quantitative impact of trade, they agree that trade can lead to higher income inequality in a high-income nation (the Stolper-Samuelson theorem). On the other hand, conventional trade theory predicts that trade will lead to lower income inequality in developing countries. Unfortunately, that prediction has not been borne out. Studies of developing countries find that trade liberalization episodes have been accompanied by rising wage inequality. There are fewer studies of developing countries compared to the literature on developed countries. Robbins (1996) in a study of developing countries in Latin America, East and South-East Asia finds that wage differentials have risen in many developing countries with high trade exposure. Using household data, he finds that trade liberalization has been accompanied by rising relative wages and demand for skilled-labor in Argentina, Chile, Costa Rica, Colombia, Malaysia, Mexico, the Philippines, Taiwan and Uruguay, contradicting the predictions of traditional trade theory. Robbins suggests that adoption of skill intensive technology via capital goods imports is responsible for rising inequality and finds some evidence for this using data on aggregate machinery imports. Wood (1997) compares the experience of Latin America since the mid-1980s with that of East Asia in the 1960s and 1970s. He points out that while the wage gap between skilled labor and unskilled labor narrowed in the four tigers (Hong Kong, the Republic of Korea, Singapore, and Taiwan) in the initial decades of export-oriented industrialization, wage differentials have risen in many of Latin American countries following their trade liberalization episodes. He suggests that the difference in experience is due to the entry of China and other large developing countries into the world market and the introduction of skilled-biased technology since the 1980s. Davis (1996) makes a similar argument and shows in a model with multiple diversification cones that local factor abundance, instead of global factor abundance, is central to determining the income distributional effects of trade liberalization. Also, Hanson and Harrison (1999) provide evidence suggesting that rising wage inequality in Mexico may have been due to import competition in low skill intensive industries. There are other possible explanations for this phenomenon. Feenstra and Hanson (1996, 1997) hypothesize that activities transferred from the north to the south are more skilled-labor intensive than those formerly produced in the south, but less skilled-labor intensive than those in the north. They argue that capital flows from the north to the south increase the relative demand for skilled labor in both the north and the south. They find evidence for this using regional data for Mexico. …

Two Phases of Labor Market Transition In Hungary: Inter-Sectoral Reallocation and Skill-Biased Technological Change

Hungary has been a front-runner in the transition to capitalism. It has also experienced exceptionally radical changes in employment and relative wages. One main feature of these changes is an enormous increase in the returns to skill. This paper argues that it is instructive to divide the process into two periods, divided by around the year 1995. The first period experienced major destruction of low-skilled jobs and large inter-sectoral reallocation, partly toward skill-intensive industries. Employment started to rebound in the second period, which has also seen a pervasive skill upgrade in all sectors. The skill premium in earnings started to grow even faster in the second stage because increasing demand for skill met a more and more inelastic supply in the short run. Long-run supply effects have been, however, strong as college enrollment rates soared. Introduction of new (foreign) capital seems to be a major factor behind increasing demand for skill. Foreign direct investment into Hungary was by far the largest among the transition countries until the late 1990?s, but other Central-Eastern European countries started to catch up since. This suggests that the Hungarian experience might be helpful to predict labor market trends in other transition economies, especially those that attract significant foreign capital.

Who Dies? International Trade, Market Structure and Industrial Restructuring

This paper examines the role of changing factor endowments in the growth and decline of industries and regions. The implications of an endowment-based Heckscher-Ohlin trade model for plant entry and exit are tested on 20 years of data for the entire US manufacturing sector. The trade model provides predictions for which industries will see growth through the positive net entry of plants. A multi-region version of the same model has predictions for which regions will see high turnover and net entry of plants. In a country such as the U.S. that is augmenting both its physical and human capital, the least capital-intensive, least skill-intensive industries are correctly predicted to have the lowest rate of net entry. In addition, increases in regional capital and skill intensity are associated with higher probabilities of shutdown, especially for plants in industries with low initial capital and skill intensities.

Globalisation and wage inequalities, 1870-1970

This article analyses the effects of globalisation on wage inequality in a group of eight now-developed countries during the century prior to 1970, using the same dependent variable and methodology as research on the impact of globalisation since 1970. The results suggest that the impact of globalisation on wage inequality before 1970 was confined largely to the effects of the pre-1914 mass migrations in the United States and Canada. Powerful domestic forces - expanding native supplies of skilled labour, the growth of new skill-intensive industries, and fluctuations in the level of aggregate demand - were the main influences on wage inequality for most of the period.

Technology, trade, and increasing inequality: does the cause matter for the cure?

This paper addresses an issue that has received a great deal of attention in recent years, both from international trade economists and from labor economists: What has caused the relative wage of skilled labor compared to unskilled labor in the USA to increase through the 1980s and 1990s? Prime candidates for causing this change have been 'trade'--the increased competition of US workers with unskilled workers abroad--and 'technology'--new products and processes that may have increased the productivity of skilled workers or skill-intensive industries relative to their unskilled counterparts. The paper reviews what has happened to relative wages and the explanations that have been suggested. A brief look at the empirical evidence from this literature is suggestive, but hardly conclusive. But the paper then asks whether the answer to this question really matters. It turns out that the appropriate policies for dealing with this change in relative wages do not depend on whether the cause of the change has been trade or technology. The paper concludes with an argument about the first-best policy for dealing with the increased wage differential, but also with some skepticism that any policy at all is needed. Copyright 1998 by Oxford University Press.

Globalisation and Wage Inequalities, 1870-1970

This paper studies the impact of globalisation on wage inequality in eight now-developed countries during the century prior to 1970, using the same dependent variable and methodology as research on the impact of globalisation since 1970. The results suggest that the impact of globalisation was confined largely to the effects of the pre-1914 mass migrations in the United States and Canada. Powerful domestic forces, which included expanding home supplies of skilled labour, the growth of new skill-intensive industries, and fluctuations in the level of aggregate demand, had a greater impact on wage inequality for most of the period.

The Uruguay round trade liberalization and structural adjustment in developing Asia

Developing Asia is undergoing rapid structural change. As ASEAN, China, and South Asia rapidly expand their labor-intensive manufactured exports, the NIEs (Hong Kong, Korea, Singapore, and Taiwan) are moving into more capital- and skill-intensive industries. The Uruguay Round trade liberalization to be implemented in the next decade or so is expected to have major impact on this process in the region. Simulations using a global computable general equilibrium model suggest that agriculture in the NIEs (along with Japan and the EU) will considerably contract as a result of trade liberalization. Textile and clothing manufacturing will substantially expand in all developing Asian economies following the phasing out of the Multifibre Arrangement, while more capital-intensive industries generally face downward pressure. With substantial welfare gains from trade liberalization, the developing Asian economies are well positioned to manage the transition and should push for vigorous implementation of the Uruguay Round reforms.

Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia

The authors identify winners and losers in Slovenia's economic transition by tracing changes in returns to education, experience, and gender and changes in wage inequality from 1987 to 1991. They find the following. Relative wages and employment rose for the most educated and fell for the least educated, in all industries. Relative wages and employment rose with years of work experience until pensionable age. At pensionable age, relative wages increased very rapidly and relative employment was greatly reduced. Using pension policies to encourage early retirement drastically reduced the supply of very experienced workers. Either the policy caused firms to bid up wages for workers of pensionable age to keep them from retiring, or it caused a selection process in which only the highest-paid workers remained in the workforce. Regardless, the pension policy has proved to be costly, and early retirements did not make room for the youngest workers but for those just under pensionable age. Women gained relative to men in both wages and employment primarily because they occupy education and industry groups less adversely affected by the transition, not because of economywide reductions in discrimination against women. Increasing returns to education and experience contributed to wage inequality, but the variance in wages also increased for individuals with identical skills. Big changes in relative wages should signal future reallocation of labor toward more productive, higher-paying sectors. Setting minimum wages, fixing ranges of pay, and indexing wages to inflation did not prevent increases in wage variation from occuring. Wage minimums did not appear to have an effect, presumably because inflation reduced real minimum wages so quickly that most workers were paid above the minimums. In Slovenia, policy changes are reflected in labor market outcomes. Disabling the tax-transfer policy from relatively profitable to relatively unprofitable firms and eliminating worker referendums on wage scales removed mechanisms that tended to compress wage variation. Greater demand for skilled workers also reflected both the economywide need to cope with uncertainty and such industry-specific factors as reduced labor demand, especially in less skill-intensive industries. The results in Slovenia contrast sharply with those in eastern Germany. Eastern German workers have had decreasing returns to education and experience. But it is not clear how relevant the eastern German experience is to other transitional economies because of western Germany's efforts to alleviate problems. More similar to the authors' findings are the results of Flanagan (1993) on the Czech Republic, which show increasing returns to education but decreasing returns to experience. In some respects, Slovenia is atypical because it is richer and more western in orientation than other transitional economies. However, economies could learn from the experience in Slovenia because Slovenia also had social ownership, full employment coupled with substantial hidden unemployment, and an egalitarian wage structure. And Slovenia has introduced labor market reform and experienced social dislocations similar to those in other transitional European economies.

Indonesia's Industrial Transformation1Part I

It is now possible to obtain a fairly complete picture of Indonesian industril development, based on the 1986 Economic Census and subsequent Updates, the mcorporation of the huge oil and gas sector, and die earlier industrial data base. The picture is one of dramatic growth and transformation since the late 1960s when Indonesia was one of the least industrialised countries for its size. In this paper we examine the pattern and changing structure of industry, focusing on industry composition, regional industrialisation, ownership, scale and wages. Indonesia's industrial transformation is evident not only in rapid Output and employment growth, but also in the transition to more capital and skill-intensive industries, a narrowing in the earlier very large (almost ‘dualistic’) productivity differentials, strong productivity and wage growth, a broadening of the industrial base outside Java, and a probable reduction in concentration levels (at least by establishment). 1 I am indebted to the Biro Pusat Statistik...