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Earnings inequality, returns to education and immigration into Ireland

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  • Barrett, Alan
  • FitzGerald, John
  • Nolan, Brian

Abstract

Increasing earnings inequality has been an important feature of the US and UK labour markets in recent years. The increase appears to be related to an increased demand for skilled labour and an increase in the returns to education. In this paper we examine what has happened to earnings inequality and the returns to education in Ireland between 1987 and 1997. We find that while both increased between 1987 and 1994, the increases slowed dramatically between 1994 and 1997. This is somewhat surprising as the exceptional growth in the Irish economy occurred from 1994 on. We look to immigration as being a contributing factor to this pattern because a large group of skilled workers flowed into the Irish labour market between 1994 and 1997. We develop a model of the Irish labour market and use it to simulate the impact of an increase in skilled labour. The simulation suggests that immigration did indeed reduce earnings inequality. This result is an interesting corollary to work from the US that shows the immigration of unskilled workers increasing earnings inequality.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 9 (2002)
Issue (Month): 5 (November)
Pages: 665-680

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Handle: RePEc:eee:labeco:v:9:y:2002:i:5:p:665-680

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Web page: http://www.elsevier.com/locate/labeco

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  1. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April.
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  17. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June.
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  19. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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