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Supply and Demand, Allocation and Wage Inequality: An International Comparison

  • Dupuy, Arnaud



  • Borghans, Lex


    (Maastricht University)

In this paper, we develop an allocation model of workers differentiated by their field of study to test whether international differences in the wage structure can be explained by differences in labor demand and supply in each country. The model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment for one occupation from real supply-demand effects. Empirical results based on data for nine countries show that cross-country differences in wage inequality explain at least 2/3 of the differences in labor demand and supply.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 907.

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Length: 35 pages
Date of creation: Oct 2003
Date of revision:
Publication status: published in: Applied Economics, 2005, 37 (9), 1073-1088
Handle: RePEc:iza:izadps:dp907
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