Decompositions of Wage Inequality and Growth in an Advanced Economy open to Trade
AbstractWe explore the uses of double-calibrated general equilibrium models as a decomposition tool for analysing contributory factors in the growth and increasing wage inequality in an advanced economy (the UK) since 1979. Calibration of a model to start and end years, based upon an assumed functional form and parameter values, produces a consistent set of decompositions for both growth and inequality. Calibrated TFP growth is consistent with the results from nonparametric growth accounting. The calibration procedure also allows us to explore different exogeneity assumptions regarding capital. However, there are more problems to modelling inequality than with growth: in particular, the main models in the literature, which take skill endowments as given, are characteristically unstable. This strongly emphasises the need for a more dynamic modelling technique, particularly regarding the skill acquisition decision and potential labour market mismatch issues
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1749.
Length: 20 pages
Date of creation: Dec 2011
Date of revision:
general equilibrium; wage inequality; trade; growth;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
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