Crude substitution: The cyclical dynamics of oil prices and the skill premium

Arbeitspapier

Higher oil-price shocks benefit unskilled workers relative to skilled workers: At the business-cycle frequency, energy prices and the skill premia display a strong, negative correlation. We assess the robustness of this negative correlation using several methods and data sources, including sector-level data. We find that the negative correlation is robust to different de-trending procedures, and the wages of unskilled workers in energy-intensive industries have a larger positive correlation with oil prices. We also estimate the parameters of an aggregate technology, which uses, among other inputs, energy and heterogeneous skills. We find that both capital-skill and capital-energy complementarity are responsible for this correlation pattern. As energy prices rise, the use of capital decreases and the demand for unskilled labor relative to skilled labor increases, resulting in lower skill premia.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2006-14a

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: skill heterogeneity ; energy prices ; business cycles ; capital-skill complementarity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Polgreen, Linnea ; Silos, Pedro
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/70728
• Last update: 10.03.2025, 11:41 AM CET