Exploring the change in skill structure of labour demand in Norwegian manufacturing

Abstract

In most OECD-countries, labour demand has shifted from unskilled to skilled over time. Many analyses of this phenomenon focus either on technical change, capital-skill complementarity or mutual labour substitution. Applying a more general approach enables us to explore the relative importance of different factors behind the shift in labour demand in Norwegian manufacturing. A multivariate error-correction model of the cost-shares of skilled and unskilled labour, materials and energy is estimated. The results show that skilled-biased technical change, primarily due to a positive effect on skilled labour and less due to a negative effect on unskilled labour, explains much of the shift in labour demand. In addition, mutual labour substitution and capital stock growth are important. Keywords: Skilled-biased technical change; Factor demand; Industry level panel data