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Solow and heterogeneous labor: A neoclassical explanation of wage inequality

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  • Meckl, Jürgen
  • Zink, Stefan

Abstract

The paper integrates human-capital investments of heterogeneous individuals into a neoclassical growth framework. The accumulation of physical capital changes relative factor prices and thus incentives to acquire skills, thereby altering the composition of the labor force. This interplay between the accumulation of human and physical capital provides a theoretical foundation for several important observations on wage inequality (e.g., the non-monotonic evolution of the skill premium) without having to hinge on specific exogenous shocks. Additional incorporation of wage rigidities emphasizes the trade off between residual wage inequality and employment opportunities for unskilled labor that is consistent with country-specific evidence. --

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Bibliographic Info

Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series I with number 312.

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Date of creation: 2001
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Handle: RePEc:zbw:kondp1:312

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Postal: D-78457 Konstanz
Phone: +49 7531 88 2314
Fax: +49-7531-88-2145
Web page: http://www.wiwi.uni-konstanz.de/
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Keywords: Wage inequality; human-capital investment; transitional adjustment dynamics;

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  1. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 957-79, July.
  2. Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1413, C.E.P.R. Discussion Papers.
  3. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(1), pages 35-78, February.
  4. Ann P. Bartel & Nachum Sicherman, 1999. "Technological Change and Wages: An Interindustry Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(2), pages 285-325, April.
  5. Acemoglu, D., 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 96-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Michael T. Kiley, 1997. "The supply of skilled labor and skill-based technological progress," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-45, Board of Governors of the Federal Reserve System (U.S.).
  8. Richard B. Freeman, 1996. "Labor market institutions and earnings inequality," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue May, pages 157-172.
  9. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series, Research Institute of Industrial Economics 471, Research Institute of Industrial Economics.
  10. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 568, China Economics and Management Academy, Central University of Finance and Economics.
  11. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  12. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
  13. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1169-1213, November.
  14. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3548, C.E.P.R. Discussion Papers.
  15. Galor, Oded & Moav, Omer, 1998. "Ability Biased Technological Transition, Wage Inequality and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1972, C.E.P.R. Discussion Papers.
  16. Meckl, Jürgen & Zink, Stefan, 2000. "Human-capital investment and the wage gap," Discussion Papers, Series I 307, University of Konstanz, Department of Economics.
  17. Jacob Mincer, 1991. "Human Capital, Technology, and the Wage Structure: What Do Time Series Show?," NBER Working Papers 3581, National Bureau of Economic Research, Inc.
  18. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(3), pages 665-91, July.
  19. Jose V. Rodriguez Mora & John Hassler, 2000. "Intelligence, Social Mobility, and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 90(4), pages 888-908, September.
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Cited by:
  1. Masaya Yasuoka, 2013. "Subsidies for Elderly Care in Pay-As-You-Go Pension," Discussion Paper Series, School of Economics, Kwansei Gakuin University 109, School of Economics, Kwansei Gakuin University, revised Sep 2013.
  2. Backman, Mikaela & Bjerke, Lina, 2009. "Returns to Higher Education - a regional perspective," Working Paper Series in Economics and Institutions of Innovation, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies 171, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  3. Atsushi Miyake & Kazunobu Muro & Tamotsu Nakamura & Masaya Yasuoka, 2009. "Between- and within-group wage inequalities, and the advent of new technology," Journal of Economic Inequality, Springer, Springer, vol. 7(4), pages 387-394, December.

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