We explore the far-reaching implications of low-wage subsidies on skill formation, aggregate employment and welfare. Low-wage subsidies have three important effects. First, they promote employment of low-skilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff...

Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no influence on employment, provided that the newly hired employees (entrants) receive their reservation wages....

The secular shift in labor demand from unskilled to skilled labor is explained within a model that is solved numerically. There are three branches producing a basic good, a differentiated luxury good, and an intermediate service. Production is more skill-intensive in the luxury good and the...

This paper studies the impact of trade within US-headquartered multinational companies (MNCs) on labour demand for all employees, as well as, for those of high and low skill in US manufacturing for the period 1995 – 2005. We find strong evidence on the positive and negative effect of...

Using data for German and Swedish multinational enterprises (MNEs), this paper assesses international employment patterns. It analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor forces attract German MNEs, but...

Does immigration accelerate sectoral change towards high-productivity sectors? This paper uses the mass displacement of ethnic Germans from Eastern Europe to West Germany after World War II as a natural experiment to study this question. A simple two-sector model of the economy, in which moving...

The Nordic countries are known for their success in combining an extensive welfare state with high labor force participation. This is explained by the origins of their welfare states that can be traced to a unique set of values and beliefs that emphasize the right of women to participate in the...

This paper evaluates the implications for employment, productivity and wages of allowing for more flexibility in weekly hours worked introduced in the recent Spanish labour market reform (the 2012 reform). A crucial aspect of the model will be the extent to which firms will be able to choose the...

We use data on motives of international outsourcing and location choices from a recent survey of European companies to assess the labour market repercussions at home. Employing Tobit models we differentiate between job losses as well as job creation for high and low skilled employees at the...

The paper builds an argument that international trade can be one explanation behind polarization of employment in the labor market observed in developed countries such as U.K. and U.S. It considers a small open economy, having production sectors which use three types of labor: high-skill,...