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

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  • Puhani, Patrick A.

Abstract

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.

Suggested Citation

  • Puhani, Patrick A., 2009. "Transatlantic Differences in Labour Markets Changes in Wage and Non-Employment Structures in the 1980s and the 1990s," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 77427, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:77427
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/77427/
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    Cited by:

    1. Alena Bičáková, 2014. "The trade-off between unemployment and wage inequality revisited," Oxford Economic Papers, Oxford University Press, vol. 66(4), pages 891-915.
    2. Nathalie Chusseau & Michel Dumont, 2013. "Growing Income Inequalities in Advanced Countries," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 1, pages 13-47, Palgrave Macmillan.
    3. Fei Peng & Lili Kang, 2013. "Labor Market Institutions and Skill Premiums: An Empirical Analysis on the UK, 1972-2002," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(4), pages 959-982.
    4. repec:bla:germec:v:9:y:2008:i::p:312-338 is not listed on IDEAS
    5. Puhani Patrick A., 2008. "Transatlantic Differences in Labour Markets: Changes in Wage and Non-Employment Structures in the 1980s and the 1990s," German Economic Review, De Gruyter, vol. 9(3), pages 312-338, August.
    6. Nathalie Chusseau & Michel Dumont, 2012. "Growing Income Inequalities in Advanced," Working Papers hal-00993359, HAL.

    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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