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Diverging patterns of education premium and school attendance in France and the US : a Walrasian view

  • David, de la Croix

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and UNIVERSITE CATHOLIQUE DE LOUVAIN ,Center for Operations Research and Econometrics (CORE) and FNRS Belgium)

  • Frédéric Docquier

    (CADRE, Univ. de Lille 2 and IZA Bonn)

We evaluate the effect of technology, demographics and policy on the differential evolution of the skill premium and on the rise in education investment in France and the USA. We use a computable general equilibrium model with overlapping generations of individuals, and endogenous education decisions. Human capital is made of two substitutable components, experience and education, both of them evolve endogenously over time. We calibrate this model on the post-war period and run counterfactual experiments to assess the effect of the different exogenous variables. French expansionary education policy boosted the supply of skills and kept the skill premium low. On the contrary, increasing education costs in the US contributed to increase wage differentials by reducing the supply of skills. The skill biased technical shock is key to understand rising school attendance and appears delayed in France.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2003010.

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Length: 35
Date of creation: 01 Jul 2003
Date of revision:
Handle: RePEc:ctl:louvir:2003010
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  1. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
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  15. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
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