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

Volume (Year): 38 (2006)
Issue (Month): 7 (April)
Pages: 771-788
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Handle: RePEc:taf:applec:v:38:y:2006:i:7:p:771-788

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Haskel, Jonathan & Slaughter, Matthew, 1999. "Trade, Technology and UK Wage Inequality," CEPR Discussion Papers 2091, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Haskel, Jonathan E. & Slaughter, Matthew J., 2002. "Does the sector bias of skill-biased technical change explain changing skill premia?," European Economic Review, Elsevier, vol. 46(10), pages 1757-1783, December. [Downloadable!] (restricted)
  3. Machin, Stephen, 1996. "Wage Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 47-64, Spring.
  4. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March. [Downloadable!] (restricted)
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  5. Daron Acemoglu, 2002. "Cross-Country Inequality Trends," NBER Working Papers 8832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. David Card & Francis Kramarz & Thomas Lemieux, 1996. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," NBER Working Papers 5487, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May. [Downloadable!] (restricted)
  9. Francis Green & Alan Felstead & Duncan Gallie, 2003. "Computers and the changing skill-intensity of jobs," Applied Economics, Taylor and Francis Journals, vol. 35(14), pages 1561-1576, September. [Downloadable!] (restricted)
  10. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June. [Downloadable!]
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  12. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Blackwell Publishing, vol. 11(4), pages 630-650, 09. [Downloadable!] (restricted)
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  14. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, April.
  15. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Ashok Parikh & Michiel Van Leuvensteijn, 2003. "Interregional labour mobility, inequality and wage convergence," Applied Economics, Taylor and Francis Journals, vol. 35(8), pages 931-941, January. [Downloadable!] (restricted)
  17. Francine D. Blau & Lawrence M. Kahn, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ioannis Cholezas & Panos Tsakloglou, 2007. "Earnings Inequality in Europe: Structure and Patterns of Inter-Temporal Changes," IZA Discussion Papers 2636, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Óscar Afonso & Maria Thompson, 2009. "Costly Investment, Complementarities and the Skill Premium," FEP Working Papers 323, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
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