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

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