The economics profession has made considerable progress in understanding the increase in wage inequality in the U.S. and the UK over the past several decades, but currently lacks a consensus on why inequality did not increase, or increased much less, in (continental) Europe over the same time period...

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Bibliographic Details

Main Author:	Acemoglu, Daron 1967- (Author)
Format:	Book
Language:	English
Published:	Cambridge, MA National Bureau of Economic Research 2002
Series:	NBER working paper series 8832
Subjects:	Skilled labor > Europe Skilled labor > United States Wage differentials > Europe Wage differentials > United States Europa USA
Online Access:	Volltext
Summary:	The economics profession has made considerable progress in understanding the increase in wage inequality in the U.S. and the UK over the past several decades, but currently lacks a consensus on why inequality did not increase, or increased much less, in (continental) Europe over the same time period. I review the two most popular explanations for these differential trends: that relative supply of skills increased faster in Europe, and that European labor market institutions prevented inequality from increasing. I argue that these two explanations go some way towards accounting for the differential cross-country inequality trends, but do not provide an entirely satisfactory explanation. In addition, it appears that relative demand for skills increased differentially across countries. Motivated by this reasoning, I develop a simple theory where labor market institutions creating wage compression in Europe also encourage more investment in technologies increasing the productivity of less-skilled workers, thus implying less skill-biased technical change in Europe than in the U.S.
Physical Description:	42 S. graph. Darst.