Lohnspreizung und Effizienz
AbstractWage Dispersion and Efficiency. It is often assumed that markets generate efficient allocations, but these are not necessarily fair. The widening of wage differentials that is currently observed is interpreted in this manner: Skill-biased technological progress increases demand for skilled work and makes unskilled labor redundant. Increasing wage dispersion is seen as a market response to an increased scarcity of skilled workers. While wage differentials are widening, we observe at the same time increasing over-qualification in all segments of the labor market. This suggests an increasing abundance of skilled workers, rather than shortage. This paper suggest an explanation for the joint occurrence of wage dispersion and over-qualification. Wage dispersion is brought about by the wage-setting policies of firms that respond to an increased importance of skill differences among workers. The widening wage differentials render the acquisition of skills more rewarding. As a result, wage dispersion and over-qualification increase together. Both are inefficient. Policies that bring wage differentials closer to compensating differentials will increase both efficiency and fairness, quite in line with the classical position taken by Adam Smith on these issues.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 2117.
Date of creation: 14 Feb 2008
Date of revision:
Wage structure; wage dispersion; wage compression; over-qualification; over-education; fairness; efficiency; wage competition; job competition; Reder competition; Adam Smith; Alfred Marshall; compensating differentials; job rents; skill-biased technological progess; heterogeneity-biased technological progress;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schlicht, Ekkehart, 1981. "Training Costs and Wage Differentials in the Theory of Job Competition," Munich Reprints in Economics 1347, University of Munich, Department of Economics.
- 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.
- Schlicht, Ekkehart, 1980. "Training Costs and Wage Differentials," Darmstadt Discussion Papers in Economics 35690, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
- Clemens Fuest & Bernd Huber, 1998. "Efficiency wages, employment, and the marginal income-tax rate: A note," Journal of Economics, Springer, vol. 68(1), pages 79-84, February.
- Paul J. Devereux, 2004. "Cyclical Quality Adjustment in the Labor Market," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 600-615, January.
- Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March.
- Gerlach, Knut & Stephan, Gesine, 2005. "Wage distributions by wage-setting regime," IAB Discussion Paper 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.