Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/222653 
Year of Publication: 
2020
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research No. 1093
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Why has the college wage premium risen rapidly in the United States since the 1980s, but not in European economies such as Germany? We argue that differences in employment protection can account for much of the gap. We develop a model in which firms and workers make relationship-specific investments in skill accumulation. The incentive to invest is stronger when employment protection creates an expectation of long-lasting matches. We argue that changes in the economic environment have reduced relationship-specific investment for less-educated workers in the United States, but not for better-protected workers in Germany.
Document Type: 
Working Paper

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