IDEAS home Printed from https://ideas.repec.org/p/ums/papers/2004-03.html
   My bibliography  Save this paper

Wage inequality and skill asymmetries

Author

Listed:
  • Peter Skott

    (University of Aarhus)

  • Paul Auerbach

Abstract

Using a simple model with two levels of skill, we assume that high-skill workers who fail to get high-skill jobs may accept low-skill positions; low-skill workers do not have the analogous option of filling high-skill positions. This asymmetry implies that an adverse, skill-neutral shock to aggregate employment may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low-skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced overeducation and credentialism.

Suggested Citation

  • Peter Skott & Paul Auerbach, 2004. "Wage inequality and skill asymmetries," UMASS Amherst Economics Working Papers 2004-03, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2004-03
    as

    Download full text from publisher

    File URL: http://www.umass.edu/economics/publications/2004-03.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 285-326.
    2. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 255-283.
    3. A. Maddison, 1997. "The nature and functioning of European capitalism: a historical and comparative perspective," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(203), pages 431-479.
    4. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
    5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    6. Edward N. Wolff, 1995. "Technology and the Demand for Skills," Economics Working Paper Archive wp_153, Levy Economics Institute.
    7. F Green & Steven McIntosh & Anna Vignoles, 1999. "Overeducation and Skills - Clarifying the Concepts," CEP Discussion Papers dp0435, Centre for Economic Performance, LSE.
    8. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
    9. Skott, Peter, "undated". "Distributional consequences of neutral shocks to economic activity in a model with efficiency wages and overeducation," Economics Working Papers 2003-5, Department of Economics and Business Economics, Aarhus University.
    10. A Felstead & D Gallie & F Green, 2000. "Computers are even more important than you thought: An Analysis of the changing skill-intensity of jobs," CEP Discussion Papers dp0439, Centre for Economic Performance, LSE.
    11. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    12. van Ours, J. C. & Ridder, G., 1995. "Job matching and job competition: Are lower educated workers at the back of job queues?," European Economic Review, Elsevier, vol. 39(9), pages 1717-1731, December.
    13. Dolton, Peter & Vignoles, Anna, 2000. "The incidence and effects of overeducation in the U.K. graduate labour market," Economics of Education Review, Elsevier, vol. 19(2), pages 179-198, April.
    14. Blinder, Alan S & Esaki, Howard Y, 1978. "Macroeconomic Activity and Income Distribution in the Postwar United States," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 604-609, November.
    15. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
    16. Marco Manacorda & Peter Robinson, 1997. "Qualifications and the Labour Market in Britain: 1984-1994 Skill Biased Change in the Demand for Labour or Credentialism?," CEP Discussion Papers dp0330, Centre for Economic Performance, LSE.
    17. Skott, Peter, 2005. "Fairness as a source of hysteresis in employment and relative wages," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 305-331, July.
    18. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
    19. Lex Borghans & Andries de Grip (ed.), 2000. "The Overeducated Worker?," Books, Edward Elgar Publishing, number 1860.
    20. David Card & Francis Kramarz & Thomas Lemieux, 1999. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 843-877, August.
    21. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-122, April.
    22. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, vol. 19(2), pages 149-158, April.
    23. Paul Auerbach & Peter Skott, "undated". "Skill Asymmetries, Increasing Wage Inequality and Unemployment," Economics Working Papers 2000-18, Department of Economics and Business Economics, Aarhus University.
    24. Jantti, Markus, 1994. "A More Efficient Estimate of the Effects of Macroeconomic Activity on the Distribution of Income," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 372-378, May.
    25. Finis Welch, 1999. "In Defense of Inequality," American Economic Review, American Economic Association, vol. 89(2), pages 1-17, May.
    26. Daly, Mary C. & Buchel, Felix & Duncan, Greg J., 2000. "Premiums and penalties for surplus and deficit education: Evidence from the United States and Germany," Economics of Education Review, Elsevier, vol. 19(2), pages 169-178, April.
    27. Hersch, Joni, 1991. "Education Match and Job Match," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 140-144, February.
    28. McKenna, C. J., 1996. "Education and the distribution of unemployment," European Journal of Political Economy, Elsevier, vol. 12(1), pages 113-132, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Skott & Frederick Guy, 2005. "Power-Biased Technological Change and the Rise in Earnings Inequality," UMASS Amherst Economics Working Papers 2005-17, University of Massachusetts Amherst, Department of Economics.
    2. Peter Skott, 2006. "Wage inequality and overeducation in a model with efficiency wages," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 94-123, February.
    3. Gibson, Bill, 2005. "The transition to a globalized economy: Poverty, human capital and the informal sector in a structuralist CGE model," Journal of Development Economics, Elsevier, vol. 78(1), pages 60-94, October.
    4. Sandén, Klas, 2007. "Risk, Occupational Choice, and Inequality," Working Papers in Economics 263, University of Gothenburg, Department of Economics.
    5. Bruno Škrinjarić, 2022. "Competence-based approaches in organizational and individual context," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paul Auerbach & Peter Skott, "undated". "Skill Asymmetries, Increasing Wage Inequality and Unemployment," Economics Working Papers 2000-18, Department of Economics and Business Economics, Aarhus University.
    2. Peter Skott, 2006. "Wage inequality and overeducation in a model with efficiency wages," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 94-123, February.
    3. Skott, Peter, 2005. "Fairness as a source of hysteresis in employment and relative wages," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 305-331, July.
    4. Léné, Alexandre, 2011. "Occupational downgrading and bumping down: The combined effects of education and experience," Labour Economics, Elsevier, vol. 18(2), pages 257-269, April.
    5. Galasi, Péter, 2004. "Túlképzés, alulképzés és bérhozam a magyar munkaerőpiacon, 1994-2002 [Over-education, under-education and wage premiums on the Hungarian labour market, 1994-2002]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 449-471.
    6. Verhaest, Dieter & Schatteman, Tom, 2010. "Overeducation in the early career: an analysis using sequence techniques," Working Papers 2010/09, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    7. Fabián Slonimczyk, 2013. "Earnings inequality and skill mismatch in the U.S.: 1973–2002," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(2), pages 163-194, June.
    8. repec:kap:iaecre:v:11:y:2005:i:1:p:93-109 is not listed on IDEAS
    9. Baktash, Mehrzad B., 2023. "Overeducation, Performance Pay and Wages: Evidence from Germany," GLO Discussion Paper Series 1327, Global Labor Organization (GLO).
    10. Andries de Grip & Hans Bosma & Dick Willems & Martin van Boxtel, 2008. "Job-worker mismatch and cognitive decline," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 237-253, April.
    11. Morsy, Hanan & Mukasa, Adamon, 2019. "Youth Jobs, Skill and Educational Mismatches in Africa," MPRA Paper 100394, University Library of Munich, Germany.
    12. Ingrid Linsley, 2005. "Causes of Overeducation in the Australian Labour Market," Department of Economics - Working Papers Series 940, The University of Melbourne.
    13. Hung, Chia-Yu, 2008. "Overeducation and undereducation in Taiwan," Journal of Asian Economics, Elsevier, vol. 19(2), pages 125-137, April.
    14. Ingrid Linsley, 2005. "Overeducation in the Australian Labour Market : Its Incidence and Effects," Department of Economics - Working Papers Series 939, The University of Melbourne.
    15. Hanan Morsy & Adamon N. Mukasa, 2019. "Working Paper 326 - Youth Jobs, Skill and Educational Mismatches in Africa," Working Paper Series 2452, African Development Bank.
    16. Brynin, Malcolm & Longhi, Simonetta, 2009. "Overqualification: Major or minor mismatch?," Economics of Education Review, Elsevier, vol. 28(1), pages 114-121, February.
    17. Santiago Budría, 2011. "Are Educational Mismatches Responsible for the ‘Inequality Increasing Effect’ of Education?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 102(3), pages 409-437, July.
    18. Iñaki Iriondo & Teodosio Pérez-Amaral, 2013. "The Effect of Educational Mismatch on Wages Using European Panel Data," Working Papers 700, Queen Mary University of London, School of Economics and Finance.
    19. Peter Dolton, 2001. "Over education in the graduate labour market: Some evidence from alumni data," CEE Discussion Papers 0009, Centre for the Economics of Education, LSE.
    20. McGuinness, Seamus & Bennett, Jessica, 2007. "Overeducation in the graduate labour market: A quantile regression approach," Economics of Education Review, Elsevier, vol. 26(5), pages 521-531, October.
    21. Galasi, Péter, 2009. "A túl- és az alulképzés bérhozama 25 európai országban [Returns for over-education and under-education for 25 European countries]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 197-215.

    More about this item

    Keywords

    wage inequality; unemployment; skill-bias; overeducation;
    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
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ums:papers:2004-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniele Girardi (email available below). General contact details of provider: https://edirc.repec.org/data/deumaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.