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Wage Dispersion and Overqualification as Entailed by Reder Competition

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Author Info
Schlicht, Ekkehart

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Abstract

The expansion of higher education in the Western countries has been accompanied by a marked widening of wage differentials and increasing overqualification. While the increase in wage differentials has been attributed to skill-biased technological change that made advanced skills scarce, this explanation does not fit well with the observed increase in overqualification which suggests that advanced skills are in excess supply. By "Reder-competition" I refer to the simultaneous adjustment of wage offers and hiring standards in response to changing labor market condition. I present a simple model of Reder competition that reproduces the simultaneous increase in wage differentials and overqualification in response to an increase in education.

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Publisher Info
Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1976.

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Date of creation: Jul 2007
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Handle: RePEc:lmu:muenec:1976

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Related research
Keywords: Hiring standards; employment criteria; selection wages; efficiency wages; mobility; skill-biased technical change; overeducation; wage dispersion; Reder competition;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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  1. Green, Francis & McIntosh, Steven & Vignoles, Anna, 2002. "The Utilization of Education and Skills: Evidence from Britain," Manchester School, University of Manchester, vol. 70(6), pages 792-811, December. [Downloadable!] (restricted)
  2. Harley Frazis & Mark A Loewenstein, 2006. "Wage Compression and the Division of Returns to Productivity Growth: Evidence from EOPP," Working Papers 398, U.S. Bureau of Labor Statistics. [Downloadable!]
  3. Stiglitz, Joseph E, 1973. "Approaches to the Economics of Discrimination," American Economic Review, American Economic Association, vol. 63(2), pages 287-95, May. [Downloadable!] (restricted)
  4. Francis Green & Steven McIntosh, 2007. "Is there a genuine under-utilization of skills amongst the over-qualified?," Applied Economics, Taylor and Francis Journals, vol. 39(4), pages 427-439. [Downloadable!] (restricted)
  5. Peter Skott, 2006. "Wage inequality and overeducation in a model with efficiency wages," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 94-123, February. [Downloadable!] (restricted)
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  6. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
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  7. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April. [Downloadable!]
  8. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September. [Downloadable!] (restricted)
  9. Christopher H. Wheeler, 2005. "Evidence on wage inequality, worker education, and technology," Review, Federal Reserve Bank of St. Louis, issue May, pages 375-393. [Downloadable!]
  10. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June. [Downloadable!] (restricted)
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