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Occupational Skill Premia around the World: New Data, Patterns and Drivers

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  • David Kunst
  • Richard B. Freeman
  • Remco Oostendorp

Abstract

Firms hire workers to undertake tasks and activities associated with particular occupations, which makes occupations a fundamental unit in economic analyses of the labor market. Using a unique dataset on pay in identically defined occupations in developing and advanced countries, we find that in most countries occupational skill premia narrowed substantially from the 1950s to the 1980s, then widened through the 2000s, creating a U-shaped pattern of change. The narrowing was due in part to the huge worldwide increase in the supply of educated workers. The subsequent widening was due in part to the weakening of trade unions and a shift in demand to more skilled workers associated with rising trade. The data indicate that supply, demand, and institutional forces are all drivers of occupational skill premia, ruling out simple single factor explanations of change. The paper concludes with a call for improving the collection of occupational wage data to understand future changes in the world of work.

Suggested Citation

  • David Kunst & Richard B. Freeman & Remco Oostendorp, 2020. "Occupational Skill Premia around the World: New Data, Patterns and Drivers," NBER Working Papers 26863, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26863
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • I2 - Health, Education, and Welfare - - Education
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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