Manufacturing wage differentials and employment in some Scandinavian countries, the U.S. and the U.K.: An analysis of variance approach

This paper presents some empirical evidence on the factors determining changes in wage differentials between skilled and unskilled workers and in their employment. An "analysis of variance" (ANOVA) model is estimated using UN data for five OECD countries in order to assess the relative importance of industry-specific, country-specific and international shocks (as well as interactions between industry and country effects). It is found that both international shocks and national policies affect wage differentials over the whole sample, whilst skill-biased technical change (SBTC) was a significant factor in the seventies. Employment responds mainly to international shocks, although national policies and SBTC were important determinants in the seventies and eighties respectively. Some of the results are found to be sensitive to the technology level of the industries considered.