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Abstract:

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CEP Discussion Paper
The Loss of Production Work: Evidence from Quasi-Experimental Identification of Labour Demand Functions
Elias Einiö
October 2016
Paper No' CEPDP1451:
Full Paper (pdf)

JEL Classification: F16; J23; J24; O33


Tags: labour demand function; occupation; offshoring; manufacturing; panel data; production work; technical change

This paper examines changes in the structure of labour demand in plant-level panel data. I exploit variation in wages across local labour markets induced by the collapse of Finland’s Soviet-dependent industry in the early 1990s to identify a labour demand model for plants producing for non-Soviet markets, which were not directly affected by the Soviet shock. I find a labour demand shift against workers in production occupations which accelerates in the 2000s, when industry patterns begin to diverge. Industry heterogeneity suggests that variation in industry structure may partly explain the differential development of wages and employment across countries.