Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223767 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13325
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
college wage premium
employment protection
job-specific skills
JEL: 
E24
J24
J31
O15
Document Type: 
Working Paper

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