The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis
IMF Working Papers, April 1, 1995
Source details
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- The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis
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Bibliographic details
- Authors: Michael P. Keane, Eswar S Prasad
- Published: April 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845518.001
Summary of core findings
- Oil price increases result in a substantial decline in real wages for all workers.
- Oil price increases raise the relative wage of skilled workers.
- Panel data econometric techniques that control for unobserved heterogeneity are essential to uncover these results; the relative-wage effect for skilled workers is completely hidden in OLS estimates.
- Changes in oil prices induce changes in employment shares and relative wages across industries.
- There is little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases.
Methodology and data
- The analysis uses micro panel data to examine effects on employment and real wages at the aggregate and industry levels.
- Worker responses are measured separately by skill level to capture differential employment and wage effects.
Industry- and skill-specific results
- Employment shares and relative wages across industries change in response to oil price movements.
- Despite industry-level relative-wage increases in some sectors, labor does not consistently reallocate into those sectors following oil price changes.
- Skilled workers experience a relative wage gain even as real wages decline in absolute terms for all workers following oil price increases.
Subject classification and keywords
- Subjects: Commodities, Employment, Inflation, Labor, Oil, Oil prices, Prices, Wages
- Keywords: DOIL terms, Employment, experience interaction term, experience terms, Inflation, interaction term, long-lived wage decline, Oil, oil coefficient, oil price, oil price variable, Oil prices, wage cut, wage decline, wage effect, wage equation, wage measure, wage rate, Wages, WP
Source: "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis", IMF Working Papers 1995, 037 (1995).