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Title:Solow and Heterogeneous Labor: A Neoclassical Explanation of Wage Inequality PDF Logo
Authors:Meckl, Jürgen
Zink, Stefan
Issue Date:2003
Series/Report no.:IZA Discussion paper series 668
Abstract:The paper analyzes the effect of human-capital investments of heterogeneous individuals on the dynamics of the wage structure within a neoclassical growth model. The accumulation of physical capital changes relative factor prices and thus incentives to acquire skills, thereby altering the composition of the labor force. Without relying on exogenous shocks, our framework generates dynamics that resembles several important observations on wage inequality (e.g., the non-monotone evolution of the skill premium). Additional incorporation of wage rigidities emphasizes the trade off between residual wage inequality and employment opportunities for unskilled labor that is consistent with country-specific evidence.
Subjects:wage inequality
human capital investment
transitional adjustment dynamics
skill-specific unemployment
JEL:I21
J31
O15
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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