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Earnings Inequality, Returns to Education and Immigration into Ireland

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  • Barrett, Alan

    ()
    (ESRI, Dublin)

  • FitzGerald, John

    ()
    (Economic and Social Research Institute, Dublin)

  • Nolan, Brian

    ()
    (University College Dublin)

Abstract

Increasing earnings inequality has been an important feature of the US and UK labour markets in recent years. The increase appears to be related to an increased demand for skilled labour and an increase in the returns to education. In this paper we examine what has happened to earnings inequality and the returns to education in Ireland between 1987 and 1997. We find that while both increased between 1987 and 1994, the increases slowed dramatically between 1994 and 1997. This is somewhat surprising as the exceptional growth in the Irish economy occurred from 1994 on. We look to immigration as being a contributing factor to this pattern because a large group of skilled workers flowed into the Irish labour market between 1994 and 1997. We develop a model of the Irish labour market and use it to simulate the impact of an increase in skilled labour. The simulation suggests that immigration did indeed reduce earnings inequality. This result is an interesting corollary to work from the US that shows the immigration of unskilled workers increasing earnings inequality.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 167.

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Length: 43 pages
Date of creation: Jun 2000
Date of revision:
Publication status: published in: Labour Economics, 2002, 9 (5), 665-680; see IZA Reprints 185/03
Handle: RePEc:iza:izadps:dp167

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Keywords: Earnings inequality; returns to education; immigration; Ireland;

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  1. Bradley, John & Fitz Gerald, John & Kearney, Ide, 1993. "Modelling supply in an open economy using a restricted cost function," Economic Modelling, Elsevier, Elsevier, vol. 10(1), pages 11-21, January.
  2. Alan Barrett & Tim Callan & Brian Nolan, 1999. "Returns to education in the Irish youth labour market," Journal of Population Economics, Springer, Springer, vol. 12(2), pages 313-326.
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  5. 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.
  6. Alois van Bastelaer & Georges Lemaître & Pascal Marianna, 1997. "The Definition of Part-Time Work for the Purpose of International Comparisons," OECD Labour Market and Social Policy Occasional Papers, OECD Publishing 22, OECD Publishing.
  7. Ide Kearney, 1997. "Estimating the Demand for Skilled Labour, Unskilled Labour and Clerical Workers: A Dynamic Framework," Papers, Economic and Social Research Institute (ESRI) WP091, Economic and Social Research Institute (ESRI).
  8. Gosling, Amanda & Machin, Stephen, 1995. "Trade Unions and the Dispersion of Earnings in British Establishments, 1980-90," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 57(2), pages 167-84, May.
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  12. 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.
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  16. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, Elsevier, vol. 41(3-5), pages 647-657, April.
  17. 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, American Economic Association, vol. 30(3), pages 1333-81, September.
  18. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  19. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number abow91-1.
  20. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
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