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Cross-Country Inequality Trends

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  • Daron Acemoglu

    (MIT)

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. Copyright Royal Economic Society 2003

Suggested Citation

  • Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:485:p:f121-f149
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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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