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Wage Dispersion, Markets and Institutions: The Effects of the Boom in Education on the Wage Structure

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  • Barth, Erling

    ()
    (Institute for Social Research, Oslo)

  • Lucifora, Claudio

    ()
    (Università Cattolica del Sacro Cuore)

Abstract

In this paper, we investigate the effects of the boom in education on the wage structure in Europe. We use detailed information on the distribution of wages, estimated from microdata from 12 European countries from the beginning of the 1980’s to the present, to analyse the changes both between and within groups. We specify and estimate a model with supply and demand for different types of labour, as well as institutions affecting the bargained relative wage. Our results show that the boom in education closely matched the shifts in demand due to (skill biased) technological change, which in turn explains why the wage premia for education only rose moderately. We use the conditional wage spread within tertiary education, predicted from quantile log wage regressions, to investigate the hypothesis of skills erosion as a result of the large expansion in tertiary education. We find no evidence in favour of the hypothesis that the boom in higher education lead to an erosion of skills within the group of tertiary education, nor evidence of increasing “over-education” in Europe. Labour market institutions also matter: bargaining co-ordination and employment protection are shown to have a compressing effect on wages, but at different points of the wage distribution.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2181.

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Length: 44 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2181

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Keywords: wage inequality; education; labour market institutions;

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References

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Citations

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Cited by:
  1. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2008. "Wage Inequality, Employment Structure and Skill-biased Change in Italy," LABOUR, CEIS, CEIS, vol. 22(s1), pages 27-51, 06.
  2. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, vol. 86(2), pages 184-196.
  3. Catia Montagna & Antonella Nocco, 2011. "Unionisation, International Integration and Selection," Dundee Discussion Papers in Economics 257, Economic Studies, University of Dundee.
  4. Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, 02.
  5. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2007. "Wage Structure, Inequality And Skill-Biased Change: Is Italy An Outlier?," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 38/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  6. Hartmut Egger & Udo Kreickemeier, . "Worker-Specific Effects of Globalisation," Discussion Papers 09/23, University of Nottingham, GEP.
  7. Longhi, Simonetta & Brynin, Malcolm, 2007. "Job competition amongst university graduates," ISER Working Paper Series 2007-18, Institute for Social and Economic Research.
  8. Fabio Clementi & Michele Giammatteo, 2012. "The labour market and the distribution of income: an empirical analysis for Italy," Working Papers 42-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Jun 2012.
  9. Longhi, Simonetta, 2007. "On-the-job search and job competition: relevance and wage impact in the UK," ISER Working Paper Series 2007-06, Institute for Social and Economic Research.
  10. Erling Barth & Bernt Bratsberg & Torbjørn Hægeland & Oddbjørn Raaum, 2008. "Performance Pay and Within-Firm Wage Inequality," Discussion Papers 535, Research Department of Statistics Norway.
  11. Hartmut Egger & Daniel Etzel, 2010. "The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium," Working Papers 088, Bavarian Graduate Program in Economics (BGPE).

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