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Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany

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  • Puhani Patrick A.

    (Leibniz Universität Hannover, Institut für Arbeitsökonomik, Königsworther Platz 1, 30167 Hannover, Germany)

Abstract

I extend a two-skill group model by Katz and Murphy (1992) to estimate relative demand and supply for skills as well as wage rigidity in Germany. Using three data sets for Germany, two for Britain and one for the United States, I simulate the change in relative wage rigidity (wage compression) in all three countries during the early and mid 1990s, this being the period when unemployment increased in Germany but fell in Britain and the US. I show that in this period, Germany experienced wage compression (relative wage rigidity), whereas Britain and the US experienced wage decompression. This evidence is consistent with the Krugman (1994) hypothesis.

Suggested Citation

  • Puhani Patrick A., 2008. "Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 573-585, October.
    • Handle: RePEc:jns:jbstat:v:228:y:2008:i:5-6:p:573-585
    DOI: 10.1515/jbnst-2008-5-610
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    References listed on IDEAS

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