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Explaining International Differences in Male Wage Inequality by differences in Demand and Supply of Skill

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  • E Leuven
  • Hessel Oosterbeek
  • H van Ophern

Abstract

According to Blau and Kahn (1996) international differences in male wage inequality cannot be explained by a simple model of supply and demand for skill. We provide compelling evidence that this conclusion is due to employing an inappropriate measure of skill. Their measure is based on the strong assumption that years of schooling and years of experience are comparable across countries. This paper employs a direct skill measure obtained from an international comparative literacy test. Using this alternative measure of skill, we find that international differences in male wage inequality by skill between the US on the one hand, and Canada, Germany, the Netherlands, Sweden and Switzerland on the other hand, are consistent with relative differences in demand and supply of skill.

Suggested Citation

  • E Leuven & Hessel Oosterbeek & H van Ophern, 1998. "Explaining International Differences in Male Wage Inequality by differences in Demand and Supply of Skill," CEP Discussion Papers dp0392, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0392
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    Cited by:

    1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, vol. 100(3), pages 1238-1260, June.
    2. Fabio Mariani, 2012. "The economic value of virtue," Journal of Economic Growth, Springer, vol. 17(4), pages 323-356, December.
    3. Hipólito Simón, 2010. "International Differences in Wage Inequality: A New Glance with European Matched Employer-Employee Data," British Journal of Industrial Relations, London School of Economics, vol. 48(2), pages 310-346, June.
    4. Peter Fredriksson & Björn Öckert & Hessel Oosterbeek, 2013. "Long-Term Effects of Class Size," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 249-285.
    5. Peter Fredriksson & Robert H. Topel, 2010. "Wage Determination and Employment in Sweden Since the Early 1990s: Wage Formation in a New Setting," NBER Chapters,in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 83-126 National Bureau of Economic Research, Inc.
    6. Etienne Wasmer & Peter Fredriksson & Ana Lamo & Julian Messina & Giovanni Peri, 2005. "The Macroeconomics of Education," Sciences Po publications info:hdl:2441/9064, Sciences Po.
    7. Richard Nahuis & Henri de Groot, 2003. "Rising skill premia; you ain't seen nothing yet?," CPB Discussion Paper 20, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
    9. Francis Green & Alan Felstead & Duncan Gallie, 2003. "Computers and the changing skill-intensity of jobs," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1561-1576.
    10. Elena Crivellaro, 2014. "College wage premium over time: trends in Europe in the last 15 years," Working Papers 2014:03, Department of Economics, University of Venice "Ca' Foscari".
    11. Elena Crivellaro, 2012. "Returns To College Over Time: Trends In Europe In The Last 15 Years. Stuck On The Puzzle," "Marco Fanno" Working Papers 0146, Dipartimento di Scienze Economiche "Marco Fanno".

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