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Institutions, Technological Change and the Wage Differentials Between Skilled and Unskilled Workers: Theory and Evidence from Europe

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Author Info

  • Corsini, Lorenzo

    (University of Pisa)

Abstract

We study the evolution of the wage differentials between graduate (skilled) and non graduate (unskilled) workers in several european countries in the period that range from the beginning of the nineties to the beginning of this century. The starting point is that all european countries show an increasing relative supply of skilled workers but different behaviours of the wage differentials. The standard explanation for non decreasing differentials in the face of rising relative supply is that technological progress is skill biased. This in turn would imply that technological progress differs in its magnitude and effects across Europe. Our finding shows that what is relevant in the determination of the differentials it is the pace and intensity at which technological progress takes place. We turn then to institutions and we build a model of imperfect competition and wage bargaining which relate the differentials to the technological progress but also to several labour market institutions. The empirical analysis on this aspect reveal that employment rates of different groups as well as the union density and the generosity of unemployment benefits are indeed important and help in explaining the evolution of the wage differentials between skilled and unskilled workers.

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Bibliographic Info

Paper provided by IRISS at CEPS/INSTEAD in its series IRISS Working Paper Series with number 2008-02.

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Length: 23 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:irs:iriswp:2008-02

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Keywords: Wage Differentials ; Technological Changes ; Labor Market Institutions;

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References

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Citations

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Cited by:
  1. Maren M. Michaelsen, 2011. "The Hidden Increase in Wage Inequality: Skill-biased and Ability-biased Technological Change," Ruhr Economic Papers 0262, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Prejmerean, Mihaela Cornelia & Vasilache, Simona, 2008. "What's a university worth? Changes in the lifestyle and status of post-2000 European Graduates," IRISS Working Paper Series 2008-05, IRISS at CEPS/INSTEAD.
  3. Dan Breznitz & Amos Zehavi, 2013. "What Does Politics Have to Do with Innovation? Economic Distribution and Innovation Policy in OECD Countries," Carlo Alberto Notebooks 303, Collegio Carlo Alberto.
  4. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute for the Study of Labor (IZA).

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