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Technology and the Future of European Employment

Edited by Pascal Petit and Luc Soete

What is the potential of the new information and communication technologies? This book assesses the relationship between technological change and employment in all its dimensions, focusing on contemporary economies in Europe. The authors discuss patterns of growth, and the type of employment that countries might expect to be created following the introduction of these new technologies.
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Chapter 4: Structural dynamics and employment in highly industrialized economies

Ronald Schettkat and Giovanni Russo


Ronald Schettkat and Giovanni Russo 1. INTRODUCTION The demand side of the labour market is significantly underrepresented in economic analysis and most explanations of high and persistent unemployment in the industrialized countries focus on labour supply rigidities caused by labour laws, unions, insider power and so on. Explanations of unemployment which take demand into account usually focus on the aggregate level but abstract from structure. However, industry structure may well be important in explaining international as well as intertemporal differences in economic performance. Without doubt, industry structure as measured in employment and nominal output has changed dramatically over recent decades. Industrial economies have been transformed into service economies. Manufacturing, after its peak at the end of the 1960s or early 1970s (Singh, 1995), has declined almost everywhere. In the meantime, service industries have expanded. However, it is not clear how this shift should be interpreted since the institutional division of national accounts data leaves the sources of change to speculation. Structural change may be caused by changes in final demand patterns, as theories of the hierarchy of needs suggest, but it may also be the result of unbalanced productivity growth and constant final demand patterns measured in real terms. Finally, a changing industry structure may also be caused by variation in the inter-industry division of labour caused either by the movement of tasks to specialized firms and industries (outsourcing) or by capital–labour substitution. In this chapter we analyse not only the pace of structural change but also its...

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