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Can labour supply explain the rise in unemployment and intergroup wage inequality in the OECD?

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  • Wasmer, E.

Abstract

This paper investigates how labour supply trends might have affected the OECD labour markets in the last decades. It is argued that changes in supply cannot be considered as homogenous: they involve more young and more adult female workers, who are complements with skilled men and substitutes with low-wage groups (young, unskilled). Such labour supply trends since the ''50s may have increased competition between women, young workers and low skilled workers in some segments of the labour force. These mechanisms are described by a model and an empirical strategy is undertaken to test its predictions. Disaggregation by gender is necessary. Endogeneity of participation levels with respect to unemployment is treated in two ways, by instrumental variables estimators, and with time series techniques. Significant causal relations between participation and unemployment cannot be rejected.

Suggested Citation

  • Wasmer, E., 1998. "Can labour supply explain the rise in unemployment and intergroup wage inequality in the OECD?," LSE Research Online Documents on Economics 20245, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:20245
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    File URL: http://eprints.lse.ac.uk/20245/
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    References listed on IDEAS

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    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
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    4. Kevin M. Murphy & Robert H. Topel, 1987. "The Evolution of Unemployment in the United States: 1968 -- 1985," NBER Chapters,in: NBER Macroeconomics Annual 1987, Volume 2, pages 11-68 National Bureau of Economic Research, Inc.
    5. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
    6. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    7. Pissarides, Christopher A., 1989. "Unemployment consequences of an aging population: An application of insider-outsider theory," European Economic Review, Elsevier, vol. 33(2-3), pages 355-366, March.
    8. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
    9. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
    10. Kim B. Clark & Lawrence H. Summers, 1982. "Labour Force Participation: Timing and Persistence," Review of Economic Studies, Oxford University Press, vol. 49(5), pages 825-844.
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    12. Nickell, S., 1991. "Wages, Unemployment and Population Change," Economics Series Working Papers 99122, University of Oxford, Department of Economics.
    13. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
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    More about this item

    Keywords

    Labour Supply; Unemployment;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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