The Skill‐Biased Effects of Exchange Rate Fluctuations

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper examines the linkages between real exchange rate movements and firms' skill demand. Real exchange rate movements may affect unskilled workers differently than skilled workers because of skill-specific adjustment costs, or because exchange rates lead to changes in relative factor prices and firms' competition intensity. Using panel data on Swiss manufacturers, we find that an appreciation increases high-skilled and reduces low-skilled employment in most firms, while total employment remains roughly unchanged. We find evidence that exchange rates influence firms' skill intensity because they affect outsourcing activities, innovation efforts, and firms' compensation schemes.

Exchange rate risk and the skill composition of labor

“…The point estimates differ slightly across columns but under column (4) we note that the magnitude of the (negative) estimated coefficient on exports is greater than that on imports, indicating that a depreciation (appreciation) of SEK leads to a decrease (increase) in the share of high-skilled workers. In recent work (Kaiser and Siegenthaler 2016) claim to be the first to study this issue and, using data from Switzerland, find the same effect: the share of high-skilled workers increase as the Swiss franc appreciates, consistent with the idea that imported inputs are a closer substitute for low-skilled workers.…”

“…To the best of our knowledge we are the first to examine the links between exchange rate risk and the skill composition of labor. In a related study (Kaiser and Siegenthaler 2016) examine the effect of a first moment exchange rate shock on the composition of skilled labor at the firm. Using rich data from Switzerland they establish that an appreciation of the Swiss franc is associated with a higher share of skilled labor.…”

Competitiveness, labor market institutions, and monetary policy

“…The illustration on page 1 plots the competition-weighted relative unit labor costs for selected developed countries, namely the US, Germany, France, the UK, and the euro area (19 countries), over the sample period 1998−2016 (see also [1] for a similar metric). The patterns show that, once adjusted for competitiveness, labor costs change significantly over time and across countries.…”

Labour Market Effects of Currency Appreciation: The Case of Switzerland

“…To the best of our knowledge, the only study that explicitly looks at the link between Swiss Franc fluctuation and employment outcomes is Kaiser and Siegenthaler (2016). Using a panel of Swiss manufacturing firms based on the KOF innovation survey, the authors find that an appreciation increases high-skilled and reduces low-skilled employment in most firms, though the aggregate impact of the Swiss Franc appreciation seem to be muted in their findings.…”