DP1490 | Small Firms, Contracting-out, Computers and Wage Inequality: Evidence from UK Manufacturing


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What demand-side and institutional factors raised the skilled wage premium over the 1980s in UK manufacturing? Using a panel of 80 industries for 1980?89 we find that: (i) the average skill premium rose by around 13 percentage points; (ii) computer introduction explains around 50% of this rise; (iii) growth in small firms and in contracting-out together explain around 20%; and (iv) the fall in unionisation explains around 15%.