Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24384
Authors: 
Muysken, Joan
Zwick, Thomas
Year of Publication: 
2000
Series/Report no.: 
ZEW Discussion Papers 00-37
Abstract: 
The US labour market is characterized by a high skill wage mark-up and low unemployment, while the German labour market has a low skill wage mark-up and a high, mainly unskilled unemployment rate. This paper adds an innovative labour supply explanation to the discussion how these distinct labour market equilibria could arise. Skill-biased technological change induces training needs for the employees willing to work in the skilled labour market and increases relative skill demand. In a simple general equilibrium model, this paper shows that skilled insiders in the USA enjoy higher rents and increase the skilled wage mark-up stronger than in Germany in the wake of skill-biased technological change. The reason is that the unskilled outsiders in the USA do not possess a powerful credible threat to improve their position. This is a consequence from higher training and education costs in the USA for unskilled employees and unemployed. In Germany, the lower skill wage mark-up leads to an increased relative skill demand which is not matched by the skill supply and therefore mis-match unemployment arises.
Subjects: 
Mis-match unemployment
training costs
skill biased technological change
Labour supply
JEL: 
O33
J31
J24
Document Type: 
Working Paper

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