IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/50195.html
   My bibliography  Save this paper

Market Mechanism and Skill Premiums in the UK 1972-2002

Author

Listed:
  • Peng, Fei
  • Kang, Lili

Abstract

This paper examines the effect of shifts in the relative supply and demand of skills on the skill premiums and wage inequality in the British labour market 1972-2002. We test the Katz and Murphy (1992) hypothesis that the changes of skill premiums can be explained by their relative supply shifts, given stable or steadily growing relative demand. Alternatively, Machin (2001) hypothesis holds if the changes of skill premiums can be explained by relative demand shifts, given stable or steadily growing relative supply. From co-variation of relative skill wages and relative labour supplies of skills, we reject the hypothesis that the relative labour demand for skill is stable over time for either males or females. By using detrended relative skill wages and supplies, we infer that the acceleration of relative demand for skills caused a positive association between relative skill wages and labour supplies for males in the 1980s and the 2000s, and for females after the 1970s. Hence, the steadily growing relative demand in Katz and Murphy (1992) can only broadly fit with the cyclical co-variation of skill premiums and supply for males, but not for the long term increasing trend of skill premiums and supply of females. We find the acceleration of relative demand for skilled workers after the 1970s as suggested in Machin (2001) hypothesis.

Suggested Citation

  • Peng, Fei & Kang, Lili, 2013. "Market Mechanism and Skill Premiums in the UK 1972-2002," MPRA Paper 50195, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:50195
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/50195/1/MPRA_paper_50195.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. O'Mahony, Mary & Peng, Fei, 2009. "Skill bias, age and organizational change," MPRA Paper 38767, University Library of Munich, Germany.
    2. 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.
    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:eme:rleczz:s0147-9121(06)26009-6 is not listed on IDEAS
    5. David Card & Thomas Lemieux & W. Craig Riddell, 2004. "Unions and Wage Inequality," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 519-562, October.
    6. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-308, May.
    7. O'Mahony, Mary & Robinson, Catherine & Vecchi, Michela, 2008. "The impact of ICT on the demand for skilled labour: A cross-country comparison," Labour Economics, Elsevier, vol. 15(6), pages 1435-1450, December.
    8. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-1482, September.
    9. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), March.
    10. Machin, Stephen, 2001. " The Changing Nature of Labour Demand in the New Economy and Skill-Biased Technology Change," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 753-776, Special I.
    11. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    12. Peng, Fei & Kang, Lili, 2013. "Cyclical changes in the wage structure of the United Kingdom: a historical review of the GHS 1972-2002," MPRA Paper 47210, University Library of Munich, Germany.
    13. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
    14. John T. Addison & Ralph W. Bailey & W. Stanley Siebert, 2007. "The Impact of Deunionisation on Earnings Dispersion Revisited," Research in Labor Economics,in: Aspects of Worker Well-Being, volume 26, pages 337-363 Emerald Publishing Ltd.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    wage inequality; labor supply; labor demand;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:50195. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.