Shifts in the Demand and Supply of Skills in the OECD: A Single-Index Model with a Continuous Distribution of Skills

This paper proposes a one-dimensional index for the gap between the demand and supply of skills; this index can be estimated based on the labour market performance of groups defined with characteristics (e.g. education) that are only imperfectly correlated with labour market skills. Using data from five European countries and the US, we find that the relative demand for skills has increased more than the relative supply in the US and UK during the 1980s but not in other European countries. However, the gap between relative demand and supply increased in Italy and the Netherlands from the early 1990s. Copyright 2007 Blackwell Publishing Ltd.