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Human Capital Policies and the Distribution of Income: A Framework for Analysis and Literature Review

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  • Daron Acemoglu

Abstract

Income and wage inequality increased rapidly in a number of OECD economies. This report surveys the literature on the determinants of wage and income inequality and presents a framework for analyzing policy. The focus is on human capital policies, but other policies that could also reduce income inequality are considered. The report concludes that increased income inequality in OECD economies reflects greater wage inequality and higher skill premia and that the most likely cause of the rise in skill premia is technical change that has increased the demand for skills and education, though changes in labor market institutions, such as minimum wage laws and the importance of union bargaining, are also likely to have played some role. Although increasing the supply of skills may have some beneficial effects, the most useful policies to reduce inequality would be those that can close the gap of skills between the top and the bottom of the income distribution, such as policies to improve the quality of secondary schooling and to encourage on-the-job training.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-03/twp01-03.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 01/03.

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Length: 134 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:nzt:nztwps:01/03

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Cited by:
  1. Ludger Wößmann, 2008. "Efficiency and equity of European education and training policies," International Tax and Public Finance, Springer, Springer, vol. 15(2), pages 199-230, April.
  2. Razzak, Weshah & Timmins, Jason, 2007. "A Macroeconomic perspective on skill shortages and the skill premium in New Zealand," MPRA Paper 1884, University Library of Munich, Germany.
  3. Trinh Le & John Gibson & Les Oxley, 2005. "Measures of human capital: A review of the literature," Treasury Working Paper Series, New Zealand Treasury 05/10, New Zealand Treasury.
  4. Dean Hyslop & Dave Mare & Jason Timmins, 2003. "Qualifications, Employment and the Value of Human Capital, 1986-2001," Treasury Working Paper Series, New Zealand Treasury 03/35, New Zealand Treasury.
  5. Mamoon, Dawood, 2011. "Do Schooling Years Improve the Earning Capacity of Lower Income Groups?," MPRA Paper 30511, University Library of Munich, Germany.
  6. Thorbecke, Erik & Charumilind, Chutatong, 2002. "Economic Inequality and Its Socioeconomic Impact," World Development, Elsevier, Elsevier, vol. 30(9), pages 1477-1495, September.

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