Will the Skill-Premium in the Netherlands Rise in the Next Decades?
AbstractWhile 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 skill-premium will remain between -5% and +5% of its 1996 level.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2708.
Length: 30 pages
Date of creation: Mar 2007
Date of revision:
Publication status: published in: Applied Economics, 2007, 39 (21), 2723-31
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Other versions of this item:
- A. Dupuy, 2007. "Will the skill-premium in the Netherlands rise in the next decades?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(21), pages 2723-2731.
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
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