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Changing Returns to Education During a Boom? The Case of Ireland

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  • Seamus McGuinness

    (Economic and Social Research Institute (ESRI))

  • Frances McGinnity

    (Economic and Social Research Institute (ESRI))

  • Philip J. O'Connell

    (Economic and Social Research Institute (ESRI))

Abstract

Ireland's "Celtic Tiger" years saw GDP per capita rise from 60% of the EU average to 120% of the average over the course of the 1990s, with a growth in employment of about 40% over the period 1994-2001. What were the consequences of the boom for returns to education and wage inequality? This paper uses data from the Living in Ireland Survey for 1994, 1997 and 2001 to examine wage inequality, the returns to education and the relative demand for labour for men and women. Theories of skilled-biased technical change suggest that the rapid period of economic growth experienced in Ireland will have been accompanied by a rise in the relative demand for skilled labour that will, in turn, have led to rising wage inequality. However, this is not the case for this period. We find fairly stable returns to education and falling wage inequality for men throughout the period, partly explained by a rapid growth in demand for unskilled labour, which helped maintain low-skilled wages. For women we find some fall in the wage premium to a university degree and falling wage inequality in the period 1997-2001. We argue that for women, low-skilled wages were kept up by the introduction of the minimum wage in 2000, and high skilled wages fell due to a rapid rise in the supply of highly qualified women. The Irish example shows that skill-biased technical change theory needs to take account of both the specific changes in the nature of labour demand and the nature and extent of concomitant changes in labour supply.

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP227.

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Length: 28 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:esr:wpaper:wp227

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  1. Barrett, Alan & Fitz Gerald, John & Nolan, Brian, 2000. "Earnings Inequality, Returns to Education and Immigration into Ireland," CEPR Discussion Papers 2493, C.E.P.R. Discussion Papers.
  2. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  3. Maarten Goos & Alan Manning, 2003. "Lousy and lovely jobs: the rising polarization of work in Britain," LSE Research Online Documents on Economics 20002, London School of Economics and Political Science, LSE Library.
  4. Nigel C. O’Leary & Peter J. Sloane, 2005. "The Return to a University Education in Great Britain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 193(1), pages 75-89, July.
  5. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
  6. Heckman, James J. & Lochner, Lance & Todd, Petra E., 2003. "Fifty Years of Mincer Earnings Regressions," IZA Discussion Papers 775, Institute for the Study of Labor (IZA).
  7. Helen Russell & Philip J. O’Connell, 2004. "Women Returning to Employment, Education and Training in Ireland - An Analysis of Transitions," The Economic and Social Review, Economic and Social Studies, vol. 35(1), pages 1-25.
  8. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
  9. Nolan, Brian & O'Neill, Donal & Williams, James, 2002. "The Impact of The Minimum Wage on Irish Firms," Research Series, Economic and Social Research Institute (ESRI), number PRS44, July.
  10. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  11. Lane, Philip & McCoy, Selina & Smith, Stephen & Smyth, Emer & Van Soest, Arthur & Walsh, John R., 2003. "Budget Perspectives 2004," Research Series, Economic and Social Research Institute (ESRI), number BMI172 edited by Callan, Tim & Doris, Aedin & McCoy, Daniel, July.
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Cited by:
  1. Alan Barrett & Adele Bergin, 2009. "Estimating the Impact of Immigration in Ireland," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 35, pages 2.
  2. Brian Nolan & Bertrand Maitre & Sarah Voitchovsky & Christopher Whelan, 2012. "GINI DP 70: Inequality and Poverty in Boom and Bust: Ireland as a Case Study," GINI Discussion Papers 70, AIAS, Amsterdam Institute for Advanced Labour Studies.
  3. Biagetti, Marco & Scicchitano, Sergio, 2009. "Wage inequality and returns to schooling in Europe: a semi-parametric approach using EU-SILC data," MPRA Paper 19060, University Library of Munich, Germany.
  4. Aysit Tansel & Fatma Bircan, 2011. "Wage Inequality and Returns to Education in Turkey: A Quantile Regression Analysis," Koç University-TUSIAD Economic Research Forum Working Papers 1102, Koc University-TUSIAD Economic Research Forum.
  5. Niamh Hardiman & Patrick Murphy & Orlaith Burke, 2008. "Legitimating Fiscal Stabilization: Ireland in Comparative Perspective," Working Papers 200813, Geary Institute, University College Dublin.
  6. Sarah Voitchovsky & Bertrand Maitre & Brian Nolan, 2012. "Wage Inequality in Ireland’s “Celtic Tiger” Boom," The Economic and Social Review, Economic and Social Studies, vol. 43(1), pages 99–133.
  7. McGuinness, Seamus & Kelly, Elish & O'Connell, Philip J., 2008. "The Impact of Wage Bargaining Regime on Firm-Level Competitiveness and Wage Inequality: The Case of Ireland," Papers WP266, Economic and Social Research Institute (ESRI).
  8. Rafal Kierzenkowski & Isabell Koske, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 8. The Drivers of Labour Income Inequality – A Literature Review," OECD Economics Department Working Papers 931, OECD Publishing.
  9. Brian Nolan & Bertrand Maitre & Sarah Voitchovsky, 2010. "Earnings Inequality, Institutions and the Macroeconomy – What Can We Learn from Ireland’s Boom Years?," Working Papers 201016, Geary Institute, University College Dublin.
  10. Smyth, Emer & McCoy, Selina, 2009. "Investing in Education: Combating Educational Disadvantage," Research Series, Economic and Social Research Institute (ESRI), number RS006, July.

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