UNU-MERIT Working Papers Series

Influence of the Sectoral Composition of Production on Occupational and Sectoral Wage Structures: Evidence from Multiple Economies

Nelson Marconi, Danilo Spinola, Tiago Porto & Eliane Araújo #2024-023

This paper explores the impact of the sectoral composition of production on the evolution of occupational structures and relative wage differentials. We employ a shift-share analysis over three periods to highlight the relevance of sectoral employment in explaining shifts in the occupational employment structure. We introduce the Weighted Occupational Unemployment by Sector (WOUS), to capture the influence of sectoral demand by occupation and the influence of labor supply on relative wage differentials. We also leverage the sectoral share on total value added (VA) as a proxy for the direct impact of sectoral production composition on relative wages. Finally, we explore the determinants of sectoral wage differentials through an econometric panel regression analysis. Our results suggest that the sectoral composition of output influences the labor demand for distinct skills, affecting the occupational composition of employment and, thus, relative wages.

JEL Classification: J21, J31, L16, O14

Keywords: Occupational structure, Relative wages, Structural change, Sector-specific labor demand

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