Wage Inequality in Germany: Disentangling Demand and Supply E¤ects
نویسنده
چکیده
The paper quantitatively evaluates the interaction between capital-skill complementarity and endogenous low-, medium-, and high-skilled labour supply in generating wage inequality, using a dynamic computable general equilibrium (CGE) model of the Auerbach-Kotliko¤ (1987) type. The counterfactual analysis conducted shows that the German skill premium de ned by the 9 to 1 decile limit of earnings would we about three times larger if labor supply was inelastic. Moreover, the constellation of the supply elasticities of low-, medium-, and high-skilled labor turn out to have a crucial inuence on the pattern of the various skill premia de ned by the 9 to 1, the 9 to 5 and the 5 to 1 decile limit of earnings. For instance, a one percent increase in the supply elasticity of high-skilled labor has an alleviating impact on the skill premium of the 9 to 1 decile limit of earnings by almost 1.6 percent. Keywords: Capital-skill complementarity, skill premium, wage inequality, endogenous labour supply, dynamic general equilibrium analysis. JEL-Classi cation: J31, J23, C68 CES, University of Munich, Schackstr. 4, 80539 Munich, Germany, [email protected]
منابع مشابه
International Trade, Growth and Wage Inequality - The Role of Human Capital Formation
In a New Trademodel with endogenous supply of skill, how knowledge difussion through international trade a¤ects growth and skill premium depends on responsiveness of skill supply to technological change. The less responsive is skill supply, the more likely that lower skill-premium accompanies higher growth after opening to trade. 1 Introduction This project deals with the question of what e¤e...
متن کاملWage Inequality and Education Choices in Latin America: a General Equilibrium Approach by Chiara Binelli :: NEUDC 2007 Papers :: Northeast Universities Development Consortium Conference :: Center for International Development at Harvard University (CID)
This paper studies the convexi cation of the returns to schooling that characterized Latin American countries in the 1990s: from a linear relationship at the end of the 1980s, the wage pro le became a convex function of the level of education. This was the result of the combined e¤ect of an increase in the wage di¤erentials between Higher and Intermediate education and a decline in the di¤erent...
متن کاملSkills vs. Productivity: How Important Are Firms for Understanding Trends in Wage Inequality?
A large literature has documented striking increases in wage inequality over the past three decades in many advanced economies, including the U.S., the U.K., and Germany (e.g., Autor and Katz, 1999; Dustmann et al, 2009; Autor and Acemoglu, 2010). Using standard neoclassical economic models, analysts have attempted to partition these observed trends in the wage structure into components due to ...
متن کاملLabour Market Institutions and Wage Inequality
In this paper we investigate the importance of labor market institutions such as unemployment insurance, unions, ring regulation and minimum wages for the evolution of male wage inequality across countries. We derive a simple log-linear equation of the wage di¤erential as a function of the institutional parameters, total factor productivity, nal good prices and relative skill supply. Our esti...
متن کاملSupply and demand, allocation and wage inequality: an international comparison
An allocation model of workers differentiated by their field of study is developed to test whether international differences in the wage structure can be explained by differences in labour demand and supply in each country. The model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment fo...
متن کامل