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Cross-country Differences in Inequality and Growth Trends: The Role of Human Capital and Labor Market Policies (Extended Abstract)
BibTeX
@MISC{Guvenen_cross-countrydifferences,
author = {Fatih Guvenen and Burhanettin Kuruscu and Serdar Ozkan},
title = {Cross-country Differences in Inequality and Growth Trends: The Role of Human Capital and Labor Market Policies (Extended Abstract)},
year = {}
}
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Abstract
This paper examines the role of policies and institutions in explaining cross-country differences in wage inequality and economic growth observed in the past four decades. For example, from the 1970’s until 1990’s wage inequality has increased substantially in the U.S. and U.K, while it has changed little in France and Germany during the same period (cf., Katz and Autor (1999)). At the same time, since the mid-90’s, productivity growth in the U.S. and U.K has outpaced France and Germany. This paper proposes a particular model of human capital accumulation (described below), and explores whether the interaction of skill-biased technical change with differences in institutions across countries can explain these and other differences in economic outcomes. The specific policies and institutions we focus on— progressive taxation, unionization, and minimum wage laws — all share the key feature that they compress the wage structure, thereby hampering the incentives to accumulate human capital. In order to discuss the specifics, we first describe the basics of the model: Individuals begin life with a fixed endowment of “raw labor” (i.e., strength, health, etc.) and are able to accumulate “human capital” (skills, knowledge, etc.) over the life cycle. The aggregate
Keyphrases
human capital cross-country difference growth trend labor market policy extended abstract wage inequality economic outcome fixed endowment specific policy skill-biased technical change wage structure particular model progressive taxation minimum wage law life cycle economic growth productivity growth raw labor human capital accumulation key feature
