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Wage Dispersion, Markets and Institutions: The Effects of the Boom in Education on the Wage Structure

Author

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  • Barth, Erling

    (Institute for Social Research, Oslo)

  • Lucifora, Claudio

    (Università Cattolica del Sacro Cuore)

Abstract

In this paper, we investigate the effects of the boom in education on the wage structure in Europe. We use detailed information on the distribution of wages, estimated from microdata from 12 European countries from the beginning of the 1980’s to the present, to analyse the changes both between and within groups. We specify and estimate a model with supply and demand for different types of labour, as well as institutions affecting the bargained relative wage. Our results show that the boom in education closely matched the shifts in demand due to (skill biased) technological change, which in turn explains why the wage premia for education only rose moderately. We use the conditional wage spread within tertiary education, predicted from quantile log wage regressions, to investigate the hypothesis of skills erosion as a result of the large expansion in tertiary education. We find no evidence in favour of the hypothesis that the boom in higher education lead to an erosion of skills within the group of tertiary education, nor evidence of increasing “over-education” in Europe. Labour market institutions also matter: bargaining co-ordination and employment protection are shown to have a compressing effect on wages, but at different points of the wage distribution.

Suggested Citation

  • Barth, Erling & Lucifora, Claudio, 2006. "Wage Dispersion, Markets and Institutions: The Effects of the Boom in Education on the Wage Structure," IZA Discussion Papers 2181, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2181
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    Cited by:

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    2. Catia Montagna & Antonella Nocco, 2013. "Unionization, international integration, and selection," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 23-45, February.
    3. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2007. "Wage Structure, Inequality And Skill-Biased Change: Is Italy An Outlier?," Quaderni del Dipartimento di Economia, Finanza e Statistica 38/2007, Università di Perugia, Dipartimento Economia.
    4. Egger, Hartmut & Etzel, Daniel, 2012. "The impact of trade on employment, welfare, and income distribution in unionized general oligopolistic equilibrium," European Economic Review, Elsevier, vol. 56(6), pages 1119-1135.
    5. Hartmut Egger & Udo Kreickemeier, 2010. "Worker‐specific Effects of Globalisation," The World Economy, Wiley Blackwell, vol. 33(8), pages 987-1005, August.
    6. Martina Mysíková & Jiří Večerník, 2019. "Returns to Tertiary Education in Western and Eastern Europe," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(1), pages 30-48.
    7. Elena Crivellaro, 2016. "The College Wage Premium over Time: Trends in Europe in the Last 15 Years," Research in Labor Economics, in: Lorenzo Cappellari & Solomon W. Polachek & Konstantinos Tatsiramos (ed.), Inequality: Causes and Consequences, volume 43, pages 287-328, Emerald Publishing Ltd.
    8. Erling Barth & Bernt Bratsberg & Torbjørn Hægeland & Oddbjørn Raaum, 2008. "Performance Pay and Within-Firm Wage Inequality," Discussion Papers 535, Statistics Norway, Research Department.
    9. Romina Boarini & Joaquim Oliveira Martins & Hubert Strauss & Christine de la Maisonneuve & Giuseppe Nicoletti, 2008. "Investment in Tertiary Education: Main Determinants and Implications for Policy," CESifo Economic Studies, CESifo, vol. 54(2), pages 277-312.
    10. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306, World Scientific Publishing Co. Pte. Ltd..
    11. Hartmut Egger & Udo Kreickemeier, 2017. "Redistributing Gains from Globalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 11, pages 307-337, World Scientific Publishing Co. Pte. Ltd..
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    16. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2008. "Wage Inequality, Employment Structure and Skill‐biased Change in Italy," LABOUR, CEIS, vol. 22(s1), pages 27-51, June.
    17. Longhi, Simonetta & Brynin, Malcolm, 2007. "Job competition amongst university graduates," ISER Working Paper Series 2007-18, Institute for Social and Economic Research.
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    19. Longhi, Simonetta, 2007. "On-the-job search and job competition: relevance and wage impact in the UK," ISER Working Paper Series 2007-06, Institute for Social and Economic Research.
    20. Paolo Naticchioni & Andrea Ricci, 2009. "Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education," Working Papers - Dipartimento di Economia 9-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
    21. Martina Mysikova & Jiri Vecernik, 2015. "Returns to education in transition and advanced European countries: The role of an expansion of higher education," Investigaciones de Economía de la Educación volume 10, in: Marta Rahona López & Jennifer Graves (ed.), Investigaciones de Economía de la Educación 10, edition 1, volume 10, chapter 44, pages 865-886, Asociación de Economía de la Educación.

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    More about this item

    Keywords

    wage inequality; education; labour market institutions;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • P5 - Economic Systems - - Comparative Economic Systems

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