Labour Market Miracle, Productivity Debacle: Measuring the Effects of Skill-Biased and Skill-Neutral Technical Change

Abstract

"This paper examines the role of skill-biased and skill-neutral technical change for productivity and employment. Thereby, we explore the puzzling macro development in Germany, witnessing job miracle and productivity debacle in parallel. In the literature, skill-biased technical change (SBTC) is known as an important driving factor for labour markets. We measure SBTC using comprehensive micro data and construct a structural macroeconometric framework identified by long-run restrictions. The results show that weaker SBTC explains 69 percent of the productivity slowdown since the early 2000s. Skill-biased technology shocks have a negative and skill-neutral technology shocks a positive hours effect. Twenty-five percent of the hours upswing since 2005 can be explained by reduced pressure from SBTC. Moreover, we analyse routine-biased technical change (RBTC) and find productivity and hours effects comparable to SBTC. However, only the latter can explain the job miracle – productivity debacle puzzle, since RBTC does not flatten substantially in the 2000s." (Author's abstract, IAB-Doku) ((en))

Cite article

Hutter, C. & Weber, E. (2021): Labour Market Miracle, Productivity Debacle: Measuring the Effects of Skill-Biased and Skill-Neutral Technical Change. In: Economic Modelling, Vol. 102. DOI:10.1016/j.econmod.2021.105584