Wage divergence and unemployment: the impact of insider power and training costs
AbstractThe US labour market is characterized by a high skill wage mark-up and low unemployment, while the German labour market has a low skill wage mark-up and a high, mainly unskilled unemployment rate. This paper adds an innovative labour supply explanation to the discussion how these distinct labour market equilibria could arise. Skill-biased technological change induces training needs for the employees willing to work in the skilled labour market and increases relative skill demand. In a simple general equilibrium model, this paper shows that skilled insiders in the USA enjoy higher rents and increase the skilled wage mark-up stronger than in Germany in the wake of skill-biased technological change. The reason is that the unskilled outsiders in the USA do not possess a powerful credible threat to improve their position. This is a consequence from higher training and education costs in the USA for unskilled employees and unemployed. In Germany, the lower skill wage mark-up leads to an increased relative skill demand which is not matched by the skill supply and therefore mis-match unemployment arises. --
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 ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-37.
Date of creation: 2000
Date of revision:
Mis-match unemployment; training costs; skill biased technological change; Labour supply;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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.:
- Holmlund, B. & Zetterberg, J., 1989.
"Insider Effects In Wage Determination: Evidence From Five Countries,"
1989a, Uppsala - Working Paper Series.
- Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
- Zon, Adriaan van & Muysken, Joan & Meijers, Huub, 1998. "Asymmetric skill substitution, labour market flexibility, and the allocation of qualifications," Open Access publications from Maastricht University urn:nbn:nl:ui:27-22459, Maastricht University.
- Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
- Lindbeck, A. & Snower, D.J., 1992.
"Patterns of Unemployment : An Insider-Outsider Analysis,"
520, Stockholm - International Economic Studies.
- Lindbeck, A. & Snower, D.J., 1992. "Patterns of Unemployment: An Insider-Outsider Analysis," Discussion Papers 1992_14, Columbia University, Department of Economics.
- Lindbeck, Assar & Snower, Dennis J., 1994. "Patterns of Unemployment: An Insider-Outsider Analysis," CEPR Discussion Papers 960, C.E.P.R. Discussion Papers.
- repec:fth:coluec:598 is not listed on IDEAS
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis And The European Unemployment Problem,"
in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90
National Bureau of Economic Research, Inc.
- Olivier J. Blanchard & Lawrence H. Summers, 1987. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bartel, Ann P & Sicherman, Nachum, 1998.
"Technological Change and the Skill Acquisition of Young Workers,"
Journal of Labor Economics,
University of Chicago Press, vol. 16(4), pages 718-55, October.
- Ann P. Bartel & Nachum Sicherman, 1999. "Technological Change and the Skill Acquisition of Young Workers," NBER Working Papers 5107, National Bureau of Economic Research, Inc.
- Anthony B. Atkinson, 2000. "The Changing Distribution of Income: Evidence and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 3-18, 02.
- Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May.
- George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
- Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
- Richard B. Freeman & Ronald Schettkat, 2000.
"The Role of Wage and Skill Differences in US-German Employment Differences,"
NBER Working Papers
7474, National Bureau of Economic Research, Inc.
- Richard B. Freeman & Ronald Schettkat, 1999. "The Role of Wage and Skill Differences in US-German Employment Differences," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(1+2), pages 49-66, July.
- Acemoglu, Daron & Pischke, Jorn-Steffen, 1999.
"Beyond Becker: Training in Imperfect Labour Markets,"
Royal Economic Society, vol. 109(453), pages F112-42, February.
- Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Joern-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," Working papers 98-12, Massachusetts Institute of Technology (MIT), Department of Economics.
- Teulings,Coen & Hartog,Joop, 1998.
"Corporatism or Competition?,"
Cambridge University Press, number 9780521590730, October.
- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
- Rennings, Klaus & Ziegler, Andreas & Zwick, Thomas, 2001. "Employment changes in environmentally innovative firms," ZEW Discussion Papers 01-46, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.