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Wage inequality and skill asymmetries

  • Peter Skott

    (University of Aarhus)

  • Paul Auerbach

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 do 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 overeducation and credentialism.

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2004-03.

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Date of creation: 2004
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Handle: RePEc:ums:papers:2004-03
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