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Wage Dispersion and Overqualification as Entailed by Reder Competition

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  • Schlicht, Ekkehart

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

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References

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  1. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1279-1333, November.
  3. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics.
  4. Peter Skott, 2005. "Wage inequality and overeducation in a model with efficiency wages," UMASS Amherst Economics Working Papers 2005-06, University of Massachusetts Amherst, Department of Economics.
  5. 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.
  6. Stiglitz, Joseph E, 1973. "Approaches to the Economics of Discrimination," American Economic Review, American Economic Association, vol. 63(2), pages 287-95, May.
  7. Bishop, John, 1987. "The Recognition and Reward of Employee Performance," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S36-56, October.
  8. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
  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.
  10. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  11. 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.
  12. Francis Green & Steven McIntosh, 2007. "Is there a genuine under-utilization of skills amongst the over-qualified?," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 427-439.
  13. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September.
  14. 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.
  15. Schlicht, Ekkehart, . "Isolation and Aggregation in Economics," Monographs in Economics, University of Munich, Department of Economics, number 3, September.
  16. 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.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Krugman und der Mindestlohn
    by Ekkehart Schlicht in Funktionale Staatsfinanzen on 2013-02-18 16:42:00

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