Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32054
Authors: 
Puhani, Patrick A.
Year of Publication: 
2005
Series/Report no.: 
Darmstadt discussion papers in economics 156
Abstract: 
Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but wage rigidities in continental Europe ('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990s.
Subjects: 
wage
earnings
unemployment
non-employment
rigidity
identification
JEL: 
J21
J31
J64
Document Type: 
Working Paper

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