The deterioration of the income and employment position of unskilled workers in the OECD since the 1980s is a well-documented fact. The debate about the causes of this development is dominated by two competing hypotheses, "North-South Trade" ("globalisation") and technological progress. Several...

We analyze how firms adjust their labor in response to idiosyncratic shifts in their production function and demand curves using a unique data-set of Swedish manufacturing firms. We show that permanent shocks to firm-level demand is a main driving force behind both job and worker reallocation....