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Wage Dispersion, Over-Qualification, and Reder Competition

  • Schlicht, Ekkehart

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.

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Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 1 (2007)
Issue (Month): ()
Pages: 1-31

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Handle: RePEc:zbw:ifweej:6636
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  1. Peter Skott, 2006. "Wage inequality and overeducation in a model with efficiency wages," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 94-123, February.
  2. 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.
  3. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  4. Schlicht, Ekkehart, . "Isolation and Aggregation in Economics," Monographs in Economics, University of Munich, Department of Economics, number 3, October.
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  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. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1279-1333.
  10. 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.
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  13. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September.
  14. 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.
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  18. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
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