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Why has wage inequality increased more in the USA than in Europe? An empirical investigation of the demand and supply of skill

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  • Daniel Fernandez Kranz
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    Abstract

    During the past two decades the wage gap between high and low skill labour has increased more in the USA than in many European countries. In this paper, the correspondence between occupation and education is used to construct aggregates of skill supply, skill demand and unemployment by skill group that are comparable across countries. Using individual data for years 1983-1994, it is found that the relative demand for skilled labour has increased to a similar extent in the USA and in Europe and that wage inequality remained low in Europe partly because the European relative supply of skill increased much faster than in the USA, and partly because European relative wages were rigid, which caused an increase in unemployment among the low-skilled.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500396087
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 38 (2006)
    Issue (Month): 7 ()
    Pages: 771-788

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    Handle: RePEc:taf:applec:v:38:y:2006:i:7:p:771-788

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    Cited by:
    1. Daron Djerdjian, 2010. "Economics versus politics in trade policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(2), pages 223-240, June.
    2. Cholezas, Ioannis & Tsakloglou, Panos, 2007. "Earnings Inequality in Europe: Structure and Patterns of Inter-Temporal Changes," IZA Discussion Papers 2636, Institute for the Study of Labor (IZA).
    3. Afonso, Oscar & Leite, Rui, 2010. "Learning-by-doing, technology-adoption costs and wage inequality," Economic Modelling, Elsevier, vol. 27(5), pages 1069-1078, September.
    4. Julie L. Hotchkiss & Menbere Shiferaw, 2011. "Decomposing the education wage gap: everything but the kitchen sink," Review, Federal Reserve Bank of St. Louis, issue July, pages 243-272.
    5. Afonso, Óscar & Thompson, Maria, 2011. "Costly investment, complementarities and the skill premium," Economic Modelling, Elsevier, vol. 28(5), pages 2254-2262, September.
    6. Óscar Afonso & Maria Thompson, 2009. "Costly Investment, Complementarities and the Skill Premium," FEP Working Papers 323, Universidade do Porto, Faculdade de Economia do Porto.
    7. Afonso, Oscar, 2008. "The impact of government intervention on wage inequality without scale effects," Economic Modelling, Elsevier, vol. 25(2), pages 351-362, March.

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