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Population growth and the wage skill premium

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  • Neves, Pedro Cunha
  • Afonso, Óscar
  • Sequeira, Tiago Neves

Abstract

We develop a general equilibrium directed technical change model with growth of skilled and unskilled labour in order to analyse the effect of heterogeneous population growth on the skill premium. Heterogeneous population growth generates a non-monotonic and non-linear relationship between the skill premium and the demographic variables, which may help explain different conflicting patterns of the skill premium across history and amongst countries. In a quantitative exercise on the US economy for almost all the 20th century, we show that the model can replicate the observed data on skill premium. We extend the quantitative exercise to consider that the R&D productivity depends on population ageing and this improved the fit of the replication of the skill-premium pattern.

Suggested Citation

  • Neves, Pedro Cunha & Afonso, Óscar & Sequeira, Tiago Neves, 2018. "Population growth and the wage skill premium," Economic Modelling, Elsevier, vol. 68(C), pages 435-449.
  • Handle: RePEc:eee:ecmode:v:68:y:2018:i:c:p:435-449
    DOI: 10.1016/j.econmod.2017.08.019
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    References listed on IDEAS

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    More about this item

    Keywords

    Population growth; Endogenous economic growth; Skill premium;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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