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Cross-country inequality trends (2003)
| Venue: | Economic Journal |
| Citations: | 96 - 2 self |
BibTeX
@ARTICLE{Acemoglu03cross-countryinequality,
author = {Daron Acemoglu},
title = {Cross-country inequality trends},
journal = {Economic Journal},
year = {2003},
pages = {121--149}
}
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Abstract
I review the two most popular explanations for the differential trends in wage inequality in US/ UK and Europe: that relative supply of skills increased faster in Europe, and that European labour market institutions prevented inequality from increasing. Although these explanations go some way towards accounting for the differential cross-country inequality trends, it also appears that relative demand for skills increased differentially across countries. I develop a simple theory where labour market institutions creating wage compression in Europe also encourage more investment in technologies increasing the productivity of less-skilled workers, implying less skill-biased technical change in Europe than the US. While over the 1980s wage inequality and returns to education increased sharply in the US and the UK, there was less of an increase, or even no change, in continental European economies; see, for example, Freeman and Katz (1995), Nickell and Bell (1996), Katz et al. (1995). Table 1 illustrates these trends by showing an estimate of the education pre-mium and the log differences of the 90th and the 10th percentiles of the wage distribution for a number of countries from the Luxembourg Income Studies
Keyphrases
cross-country inequality trend wage inequality simple theory 10th percentile labour market institution relative supply skill-biased technical change continental european economy luxembourg income study less-skilled worker wage distribution education pre-mium relative demand u uk differential trend log difference wage compression european labour market institution popular explanation differential cross-country inequality trend
