Dynamics of demand for skills and industrial structure of economy: Developed and developing countries

Abstract

The paper considers changes in the structure of employment by skill level in countries. Differences in dynamics of the shares of employed with high, medium and low skill levels is traditionally explained by differences in exposure to routine-biased technologies, participation in international trade, exposure to offshoring in the country. The current paper contributes to the literature about the drivers and determinants of changes in structure of employment by skill level considering the industrial structure to be the one of main factors. We assume that the dynamics of employees with high, medium and low skill levels depends on the shares of agriculture, manufacturing and service in the economy. Service industry has the largest share of employment; it is highly competitive and prone to the growing influence of large scale technologies. Using the data of 218 countries for the period 1989–2019 we prove that the greater the service industry in the economy, the higher the share of employed in high skill occupations in absolute value and relative to the share of employed in medium skill occupations. The faster the growth of service industry, the higher the growth rate of the number of employed in medium and high skill occupations. The share of manufacturing in GDP, the value of GDP per capita are the significant determinants of the dependent variables. We highlight substantial differences in the models of the structure of employment by skill level and its dynamics in the developed and developing countries, the oil exporting countries. The research results make it possible to identify and explain trends in structure of employment by skill level by the peculiarities of production in economy.