Structural change and relative demand for skilled workers: new evidence from the US manufacturing

The present paper empirically investigates the effects of structural change-change in labor productivity fueled by labor reallocation across industries-on relative demand for skilled workers, using the NBER-CES Manufacturing Industry Database for the period of 1958-2011. The measures unveil that the US manufacturing sectors had experienced dramatic structural change since the 1990s when labor was reallocated from high-productivity to low- productivity industries. Furthermore, we find the evidence that the growth-reducing structural change impinges positively on relative demand for skilled workers and is therefore another driving force of rising wage inequality, apart from high-tech capital investment and outsourcing activities, in the US manufacturing sectors.