Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/68881 
Year of Publication: 
2001
Series/Report no.: 
Diskussionsbeiträge - Serie I No. 312
Publisher: 
Universität Konstanz, Fachbereich Wirtschaftswissenschaften, Konstanz
Abstract: 
The paper integrates human-capital investments of heterogeneous individuals into a neoclassical growth framework. The accumulation of physical capital changes relative factor prices and thus incentives to acquire skills, thereby altering the composition of the labor force. This interplay between the accumulation of human and physical capital provides a theoretical foundation for several important observations on wage inequality (e.g., the non-monotonic evolution of the skill premium) without having to hinge on specific exogenous shocks. Additional incorporation of wage rigidities emphasizes the trade off between residual wage inequality and employment opportunities for unskilled labor that is consistent with country-specific evidence.
Subjects: 
Wage inequality
human-capital investment
transitional adjustment dynamics
JEL: 
I21
J31
O15
Document Type: 
Working Paper

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