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Wage inequality and unemployment with overeducation

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Abstract

A skill-biased change in technology can account at once for the changes observed in a number of important variables of the US labour market between 1970 and 1990. These include the increasing inequality in wages, both between and within education groups, and the increase in unemployment at all levels of education. In contrast, in previous literature this type of technology shock cannot account for all of these changes. The paper uses a matching model with a segmented labour market, an imperfect correlation between individual ability and education, and a fixed cost of setting up a job. The endogenous increase in overeducation is key to understand the response of unemployment to the technology shock.

Suggested Citation

  • Xavier Cuadras Morató & Xavier Mateos-Planas, 2006. "Wage inequality and unemployment with overeducation," Economics Working Papers 938, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:938
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    References listed on IDEAS

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    2. Saint-Paul, Gilles, 1996. "Are the unemployed unemployable?," European Economic Review, Elsevier, vol. 40(7), pages 1501-1519, August.
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    4. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
    5. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
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    10. Heathcote, Jonathan & Storesletten, Kjetil & Violante, Giovanni L, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers.
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    12. N/A, 1995. "Abstracts," The Journal of Entrepreneurship, Entrepreneurship Development Institute of India, vol. 4(1), pages 129-143, March.
    13. Eric D. Gould, 2002. "Rising Wage Inequality, Comparative Advantage, and the Growing Importance of General Skills in the United States," Journal of Labor Economics, University of Chicago Press, vol. 20(1), pages 105-147, January.
    14. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    15. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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    18. Xavier Cuadras-Morató & Xavier Mateos-Planas, 2006. "Skill Bias And Employment Frictions In The U.S. Labor Market 1970-1990 ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 129-160, February.
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    Cited by:

    1. Ghignoni, Emanuela & Verashchagina, Alina, 2014. "Educational qualifications mismatch in Europe. Is it demand or supply driven?," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 670-692.
    2. Nelson Oviedo & Gustavo Yamada, 2017. "Educación superior y subempleo profesional, ¿Una creciente burbuja mundial?," Working Papers 1609, Departamento de Economía, Universidad del Pacífico, revised Feb 2017.

    More about this item

    Keywords

    Unemployment; wage premium; overeducation; SBTC;

    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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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