Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle

Jan Rose Skaksen, Anders Sørensen

Publikation: Working paperForskning

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Resumé

The relative demand for skills has increased considerably in many OECD countriesduring recent decades. This development is potentially explained by capital-skillcomplementarity and high growth rates of capital equipment. When productionfunctions are characterized by capital-skill complementarity, relative wages and employmentof skilled labor are countercyclical because capital equipment is a quasi-fixed factor in the short run. The exact behavior of the two variables depends onrelative wage flexibility. Relative wages are rigid in Denmark, implying that the employmentshare of skills should be countercyclical. The labor market is competitivein the United States and therefore relative wages of skilled labor are expected to becountercyclical. We find that the business cycle development of the two economiesis consistent with capital-skill complementarity.Keywords: capital-skill complementarity, relative wages, business cycle
OriginalsprogEngelsk
Udgivelses stedFrederiksberg
UdgiverCopenhagen Business School, CBS
Antal sider29
StatusUdgivet - 2004
NavnWorking Paper / Department of Economics. Copenhagen Business School
Nummer10-2004

Emneord

  • USA
  • Danmark
  • Lønteori
  • Løn
  • Arbejdskraftens kvalifikationer
  • Kapitalteori
  • Produktionsfaktorer

Citer dette

Rose Skaksen, J., & Sørensen, A. (2004). Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle. Frederiksberg: Copenhagen Business School, CBS. Working Paper / Department of Economics. Copenhagen Business School, Nr. 10-2004
Rose Skaksen, Jan ; Sørensen, Anders. / Capital-Skill Complementarity and Rigid Relative Wages : Inference from the Business Cycle. Frederiksberg : Copenhagen Business School, CBS, 2004. (Working Paper / Department of Economics. Copenhagen Business School; Nr. 10-2004).
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abstract = "The relative demand for skills has increased considerably in many OECD countries during recent decades. This development is potentially explained by capital-skill complementarity and high growth rates of capital equipment. When production functions are characterized by capital-skill complementarity, relative wages and employment of skilled labor are countercyclical because capital equipment is a quasi-fixed factor in the short run. The exact behavior of the two variables depends on relative wage flexibility. Relative wages are rigid in Denmark, implying that the employment share of skills should be countercyclical. The labor market is competitive in the United States and therefore relative wages of skilled labor are expected to be countercyclical. We find that the business cycle development of the two economies is consistent with capital-skill complementarity.",
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Rose Skaksen, J & Sørensen, A 2004 'Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle' Copenhagen Business School, CBS, Frederiksberg.

Capital-Skill Complementarity and Rigid Relative Wages : Inference from the Business Cycle. / Rose Skaksen, Jan; Sørensen, Anders.

Frederiksberg : Copenhagen Business School, CBS, 2004.

Publikation: Working paperForskning

TY - UNPB

T1 - Capital-Skill Complementarity and Rigid Relative Wages

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AU - Rose Skaksen, Jan

AU - Sørensen, Anders

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N2 - The relative demand for skills has increased considerably in many OECD countries during recent decades. This development is potentially explained by capital-skill complementarity and high growth rates of capital equipment. When production functions are characterized by capital-skill complementarity, relative wages and employment of skilled labor are countercyclical because capital equipment is a quasi-fixed factor in the short run. The exact behavior of the two variables depends on relative wage flexibility. Relative wages are rigid in Denmark, implying that the employment share of skills should be countercyclical. The labor market is competitive in the United States and therefore relative wages of skilled labor are expected to be countercyclical. We find that the business cycle development of the two economies is consistent with capital-skill complementarity.

AB - The relative demand for skills has increased considerably in many OECD countries during recent decades. This development is potentially explained by capital-skill complementarity and high growth rates of capital equipment. When production functions are characterized by capital-skill complementarity, relative wages and employment of skilled labor are countercyclical because capital equipment is a quasi-fixed factor in the short run. The exact behavior of the two variables depends on relative wage flexibility. Relative wages are rigid in Denmark, implying that the employment share of skills should be countercyclical. The labor market is competitive in the United States and therefore relative wages of skilled labor are expected to be countercyclical. We find that the business cycle development of the two economies is consistent with capital-skill complementarity.

KW - USA

KW - Danmark

KW - Lønteori

KW - Løn

KW - Arbejdskraftens kvalifikationer

KW - Kapitalteori

KW - Produktionsfaktorer

KW - Capital-skill complementarity

KW - Relative wages

KW - Business cycles

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Rose Skaksen J, Sørensen A. Capital-Skill Complementarity and Rigid Relative Wages: Inference from the Business Cycle. Frederiksberg: Copenhagen Business School, CBS. 2004.