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Between-Group Competition In The Labour Market And The Rising Returns To Skill: US And France 1964-2000

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  • Wasmer, Etienne

Abstract

This Paper describes the changes in the composition of the labour force in the last 35 years and quantifies the substitution of low education / high experience workers by low experience / high education workers by using US and French microdata. The consequences of this substitution on the wage structure are then investigated. In the US, labour supply changes can explain the changes in returns to experience. It also accounts for a part of the increase in returns to education between 1980 and 2000, between 8% and 20% depending on the specification. These results rely on panel estimates of a useful concept: the elasticity of substitution between experience and education, which is found to be less than half. In France, the covariations of prices and the supply of skills are consistent with a pure labour supply explanation. Methodologically, the Paper shows that the use of a stock measure of efficient units of skills is better than flow measures (e.g. cohort size). It also allows analysis of the consequences of rising female labour participation.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2798.

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Date of creation: May 2001
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Handle: RePEc:cpr:ceprdp:2798

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Keywords: Education; Experience; Labour Supply; Wage Inequality;

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References

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  1. 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.
  2. James H. Grant & Daniel S. Hamermesh, 1980. "Labor Market Competition among Youths, White Women, and Others," NBER Working Papers 0519, National Bureau of Economic Research, Inc.
  3. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
  4. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  5. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  6. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  7. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  8. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1.
  9. 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.
  10. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  11. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers 734, Princeton University, Department of Economics, Industrial Relations Section..
  12. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
  13. Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
  14. Guy Laroque & Bernard Salanié, 1999. "Breaking Down Married Female Non-Employment in France," Working Papers 99-31, Centre de Recherche en Economie et Statistique.
  15. Freeman, Richard B., 1987. "Demand for education," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 6, pages 357-386 Elsevier.
  16. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S65-97, October.
  17. Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
  18. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
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  22. repec:fth:inseep:9931 is not listed on IDEAS
  23. Wasmer, Etienne, 2001. "Measuring human capital in the labor market: The supply of experience in 8 OECD countries," European Economic Review, Elsevier, vol. 45(4-6), pages 861-874, May.
  24. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
  25. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
  26. Daniel S. Hamermesh & James Grant, 1979. "Econometric Studies of Labor-Labor Substitution and Their Implications for Policy," Journal of Human Resources, University of Wisconsin Press, vol. 14(4), pages 543-562.
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  28. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
  29. repec:fth:prinin:355 is not listed on IDEAS
  30. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  31. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
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Cited by:
  1. Susan Johnson & Peter Kuhn, 2004. "Increasing Male Earnings Inequality in Canada and the United States, 1981­1997: The Role of Hours Changes versus Wage Changes," Canadian Public Policy, University of Toronto Press, vol. 30(2), pages 155-176, June.

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