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Wage Dispersion, Over-Qualification, and Reder Competition

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  • Schlicht, Ekkehart

Abstract

The expansion of higher education in the Western countries has been accompanied by a marked widening of wage differentials and increasing over-qualification. While the increase in wage differentials has been attributed to skill-biased technological change that made advanced skills scarce, this explanation does not fit well with the observed increase in over-qualification which suggests that advanced skills are in excess supply. By ?Reder-competition? I refer to the simultaneous adjustment of wage offers and hiring standards in response to changing labor market conditions. I present a simple model of Reder competition that depicts wages as driven by labor heterogeneity, rather than scarcity. The mechanism may give rise to a simultaneous increase in wage differentials and over-qualification.

Suggested Citation

  • Schlicht, Ekkehart, 2007. "Wage Dispersion, Over-Qualification, and Reder Competition," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-31.
  • Handle: RePEc:zbw:ifweej:6636
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2007-13
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    References listed on IDEAS

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    1. Green, Francis & McIntosh, Steven & Vignoles, Anna, 2002. "The Utilization of Education and Skills: Evidence from Britain," Manchester School, University of Manchester, vol. 70(6), pages 792-811, December.
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    4. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
    5. Schlicht, Ekkehart, . "Isolation and Aggregation in Economics," Monographs in Economics, University of Munich, Department of Economics, number 3, Jul-Dec.
    6. M. W. Reder, 1964. "Wage Structure and Structural Unemployment," Review of Economic Studies, Oxford University Press, vol. 31(4), pages 309-322.
    7. 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.
    8. Christopher H. Wheeler, 2005. "Evidence on wage inequality, worker education, and technology," Review, Federal Reserve Bank of St. Louis, issue May, pages 375-393.
    9. Bishop, John, 1987. "The Recognition and Reward of Employee Performance," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 36-56, October.
    10. Ekkehart Schlicht, 2005. "Hiring Standards And Labour Market Clearing," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 263-279, May.
    11. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    12. 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.
    13. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-571, September.
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    16. Francis Green & Steven McIntosh, 2007. "Is there a genuine under-utilization of skills amongst the over-qualified?," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 427-439.
    17. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Krugman und der Mindestlohn
      by Ekkehart Schlicht in Funktionale Staatsfinanzen on 2013-02-18 22:42:00
    2. Überqualifikation
      by Ekkehart Schlicht in Funktionale Staatsfinanzen on 2018-03-11 08:17:00

    Citations

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    Cited by:

    1. Johannes Ludsteck, 2014. "Exploiting Regional Heterogeneity to Test Wage Setting Theories - Firm Size Wage Effects in Urban and Rural Regions," ERSA conference papers ersa14p374, European Regional Science Association.
    2. Ayako Saiki & Jon Frost, 2014. "How does unconventional monetary policy affect inequality? Evidence from Japan," DNB Working Papers 423, Netherlands Central Bank, Research Department.
    3. Ayako Saiki & Jon Frost, 2014. "Does unconventional monetary policy affect inequality? Evidence from Japan," Applied Economics, Taylor & Francis Journals, vol. 46(36), pages 4445-4454, December.

    More about this item

    Keywords

    Hiring standards; employment criteria; selection wages; efficiency wages; mobility; skillbiased technological change; heterogeneity-biased technological change; over-qualification; over-education; wage dispersion; Reder competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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