I build a model with heterogeneous agents which is consistent both with rising wage inequality across education levels and with an increasing relative number of college graduates. I use the model to investigate the welfare implications of policies which influence the structure of net wages. Each policy affects agents directly through taxes and subsides and indirectly as wages respond to changes in the relative supply of skilled and unskilled workers. I find that as wage inequality grows due to skill-biased technological change, policies which promote a more egalitarian wage structure can become increasingly acceptable to all agents and that for nearly all agents, education subsidies may be preferred to direct transfers as a means of decreasing wage inequality. (Copyright: Elsevier)
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 2 (1999) Issue (Month): 4 (October) Pages: 820-849 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General I28 - Health, Education, and Welfare - - Education - - - Government Policy H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
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