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Wage inequality and skill asymmetries

Author

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  • Skott, Peter

    (University of Massachusetts, Amherst)

  • Auerbach, Paul

    (Kingston University London)

Abstract

Using a simple model with two levels of skill, we assume that high-skill workers who fail to get high-skill jobs may accept low-skill positions; low-skill workers so not have the analogous option of filling high-skill positions. This asymmetry implies that an adverse, skill-neutral shock to aggregate employment may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low-skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced over-education and credentialism.

Suggested Citation

  • Skott, Peter & Auerbach, Paul, 2003. "Wage inequality and skill asymmetries," Economics Discussion Papers 2003-7, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2003_007
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    References listed on IDEAS

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    Cited by:

    1. Peter Skott & Frederick Guy, 2005. "Power-Biased Technological Change and the Rise in Earnings Inequality," UMASS Amherst Economics Working Papers 2005-17, University of Massachusetts Amherst, Department of Economics.
    2. Peter Skott, 2006. "Wage inequality and overeducation in a model with efficiency wages," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 94-123, February.
    3. Gibson, Bill, 2005. "The transition to a globalized economy: Poverty, human capital and the informal sector in a structuralist CGE model," Journal of Development Economics, Elsevier, vol. 78(1), pages 60-94, October.
    4. Sandén, Klas, 2007. "Risk, Occupational Choice, and Inequality," Working Papers in Economics 263, University of Gothenburg, Department of Economics.
    5. Bruno Škrinjarić, 2022. "Competence-based approaches in organizational and individual context," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.

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    More about this item

    Keywords

    wage inequality; unemployment; skill bias; overeducation;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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