Low Skill but High Volatility?

42 Pages Posted: 15 Jun 2009

See all articles by Claudia M. Buch

Claudia M. Buch

Deutsche Bundesbank

Christian Pierdzioch

Saarland University - Department of Economics and Statistics

Date Written: May 2009

Abstract

Globalization may impose a double-burden on low-skilled workers. On the one hand, the relative supply of low-skilled labor increases. This suppresses wages of low-skilled workers and/or increases their unemployment rates. On the other hand, low-skilled workers typically face more limited access to financial markets than high-skilled workers. This limits their ability to smooth shocks to income intertemporally and to share risks across borders. Using cross-country, industry-level data for the years 1970-2004, we document how the volatility of hours worked and of wages of workers at different skill levels has changed over time. We develop a stylized theoretical model that is consistent with the empirical evidence, and we test the predictions of the model. Our results show that greater financial globalization and development increases the volatility of employment, and this effect is strongest for low-skilled workers. A higher share of low-skilled employment has a dampening impact.

Keywords: labor-market volatility, skill levels, financial globalization

JEL Classification: F41

Suggested Citation

Buch, Claudia M. and Pierdzioch, Christian, Low Skill but High Volatility? (May 2009). CESifo Working Paper Series No. 2665, Available at SSRN: https://ssrn.com/abstract=1419938 or http://dx.doi.org/10.2139/ssrn.1419938

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Christian Pierdzioch

Saarland University - Department of Economics and Statistics ( email )

P.O. Box 151150
D-66041 Saarbruecken
Germany
+49 681 302 58195 (Phone)
+49 681 302 58193 (Fax)

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