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Skill-Biased Technical Change and Wage Inequality: The U.S. versus Europe

Author

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  • Ryosuke Okazawa

    (Graduate School of Economics, Kyoto University)

Abstract

This paper analyzes the effect of the recent technical change on the labor market and explains the observed differences in wage inequality among advanced countries. In particular, we focus on the difference between the wage inequality in the U.S. and continental Europe. By introducing human capital investment into Acemoglu (1999)'s model, we show that ex ante homogeneous economies would have distinct ex post wage inequality. In addition, we show that the differences in tax or education system can explain the difference in wage inequality between the U.S. and Europe.

Suggested Citation

  • Ryosuke Okazawa, 2009. "Skill-Biased Technical Change and Wage Inequality: The U.S. versus Europe," KIER Working Papers 674, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:674
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP674.pdf
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    More about this item

    Keywords

    skill-biased technical change; wage inequality; human capital investment; matching;
    All these keywords.

    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; 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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