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Transatlantic Differences in Labour Markets Changes in Wage and Non-Employment Structures in the 1980s and the 1990s

  • Puhani, Patrick A.

Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but wage rigidities in continental Europe ('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990s.

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Paper provided by Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) in its series Darmstadt Discussion Papers in Economics with number 36793.

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Date of creation: Nov 2005
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Publication status: Published in Darmstadt Discussion Papers in Economics . 156 (2005-11)
Handle: RePEc:dar:ddpeco:36793
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/36793/
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