EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/20026
  
Title:Higher Education Levels, Firms? Outside Options and the Wage Structure PDF Logo
Authors:Rosén, Åsa
Wasmer, Etienne
Issue Date:2002
Series/Report no.:IZA Discussion paper series 420
Abstract:We analyze the consequences of an increase in the supply of highly educated workers on relative and real wages in a search model where wages are set by Nash-bargaining. The key insight is that an increase in the supply of highly educated workers improves the firms? outside option. As a consequence, the real wage of all workers decreases in the short-run. Since this decline is more pronounced for less educated workers, wage inequality increases. In the long-run a better educated work force induces firms to invest more in physical capital. Wage inequality and real wages of highly educated workers increase while real wages of less educated workers may decrease. These results are consistent with the U.S. experience in the 70s and 80s. Based upon differences in legal employment protection we also provide an explanation for the diverging evolution of real and relative wages in Continental Europe.
Subjects:Wage inequality
matching
creation costs
firing costs
JEL:J31
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
dp420.pdf311.06 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/20026

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.