Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172532
Authors: 
Davoine, Thomas
Mankart, Jochen
Year of Publication: 
2017
Series/Report no.: 
Bundesbank Discussion Paper 38/2017
Abstract: 
The US skill premium and college enrollment have increased substantially over the past few decades. In addition, while low-wage earners worked more than highwage earners in 1970, the opposite was true in 2000. We show that a parsimonious neoclassical model featuring skill-biased technical change, endogenous education and labor supply decisions can explain the change in the college education rate between 1967 and 2000 as well as the trend in the wage-hours correlation. Moreover, we show analytically and quantitatively that endogenous labor supply is important. Assuming constant hours significantly biases the estimates of the effects of skillbiased technological progress on college enrollment and the skill premium. Further, we find that limiting the maximum number of hours someone can work lowers welfare for almost all generations. Since it increases the skill premium, the welfare loss is most severe for the low-skilled, reaching almost one percent of life-time consumption.
Subjects: 
higher education
wage inequality
skill-biased technical change
labor supply
working time regulation
JEL: 
I24
J2
J31
ISBN: 
978-3-95729-419-7
Document Type: 
Working Paper

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