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Will the Skill-Premium in the Netherlands Rise in the Next Decades?

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Author Info
Arnaud Dupuy () (ROA, Maastricht University and IZA)

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Abstract

While the skill-premium has been rising sharply in the US and the UK for 20 years, the Dutch skill-premium decreased for much of that period and only started to rise in the early 90s. In this paper, we investigate whether the Dutch skill-premium will rise in the next decades. To answer this question, we forecast the skill-premium using the Katz and Murphy (1992) and the Krusell et al. (2000) models. The Katz and Murphy model (KM) explains demand shifts by skill-biased technological change in unobservable variables captured by a time trend. In contrast, the Krusell et al. model (KORV) explains demand shifts by (observable) changes in the capital stock under a capital-skill complementarity technology. The results show that while the KM model predicts that the skill-premium will have increased by 30% in 2020, based on realistic predictions of the stock of capital, the KORV model predicts that the skillpremium will remain between -5% and +5% of its 1996 level.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2708.

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Length: 30 pages
Date of creation: Mar 2007
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Handle: RePEc:iza:izadps:dp2708

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Related research
Keywords: skill-premium skill-biased technical change capital-skill complementarity

Other versions of this item:

Find related papers by JEL classification:
D33 - Microeconomics - - Distribution - - - Factor Income Distribution
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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References listed on IDEAS
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  1. Paul Beaudry & David A. Green, 2003. "Wages and Employment in the United States and Germany: What Explains the Differences?," American Economic Review, American Economic Association, vol. 93(3), pages 573-602, June. [Downloadable!] (restricted)
  2. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May. [Downloadable!] (restricted)
  3. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May. [Downloadable!] (restricted)
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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  5. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November. [Downloadable!] (restricted)
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  6. Johnson, George E, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring. [Downloadable!] (restricted)
  7. Bas Jacobs, 2004. "The Lost Race between Schooling and Technology," De Economist, Springer, vol. 152(1), pages 47-78, 03. [Downloadable!]
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