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Accounting for Wage and Employment Changes in the U.S. from 1968-2000: A Dynamic Model of Labor Market Equilibrium

Author

Listed:
  • Donghoon Lee

    (Economics NYU)

  • Kenneth I. Wolpin

Abstract

This paper presents a unified treatment of and explanation for the evolution of wages and employment in the U.S. over the last 30 years. Specifically, we account for the pattern of changes in wage inequality, for the increased relative wage and employment of women, for the emergence of the college wage premium and for the shift in employment from the goods to the service-producing sector. The underlying theory we adopt is neoclassical, a two-sector competitive labor market economy in which the supply of and demand for labor of heterogeneous skill determines spot market skill-rental prices. The empirical approach is structural. The model embeds many of the features that have been posited in the literature to have contributed to the changing U.S. wage and employment structure including skill-biased technical change, capital-skill complementarity, changes in relative product-market prices, changes in the productivity of labor in home production and demographics such as changing cohort size and fertility.

Suggested Citation

  • Donghoon Lee & Kenneth I. Wolpin, 2006. "Accounting for Wage and Employment Changes in the U.S. from 1968-2000: A Dynamic Model of Labor Market Equilibrium," 2006 Meeting Papers 172, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:172
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    gender wage differential; college wage premium; sectoral changes;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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