Small Firms, Contracting-Out, Computers and Wage Inequality: Evidence from UK Manufacturing.

What demand-side and institutional factors raised the skilled wage premium over the 1980s in U.K. manufacturing? Using a panel of eighty industries over l980-89, the author finds that (1) the average skill premium rose by around 13 percentage points; (2) computer introduction explains around 50 percent of this rise; (3) the growth in small firms and in contracting-out together explain around 20 percent of the rise; and (4) the fall in unionization explains around 15 percent of the rise. Copyright 1999 by The London School of Economics and Political Science