Wage divergence and unemployment: the impact of insider power and training costs

Arbeitspapier

The US labour market is characterized by a high skill wage mark-up and low unemployment, while the German labour market has a low skill wage mark-up and a high, mainly unskilled unemployment rate. This paper adds an innovative labour supply explanation to the discussion how these distinct labour market equilibria could arise. Skill-biased technological change induces training needs for the employees willing to work in the skilled labour market and increases relative skill demand. In a simple general equilibrium model, this paper shows that skilled insiders in the USA enjoy higher rents and increase the skilled wage mark-up stronger than in Germany in the wake of skill-biased technological change. The reason is that the unskilled outsiders in the USA do not possess a powerful credible threat to improve their position. This is a consequence from higher training and education costs in the USA for unskilled employees and unemployed. In Germany, the lower skill wage mark-up leads to an increased relative skill demand which is not matched by the skill supply and therefore mis-match unemployment arises.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 00-37

Classification and Topics

• Classification: Wirtschaft ; Technological Change: Choices and Consequences; Diffusion Processes ; Wage Level and Structure; Wage Differentials ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: Mis-match unemployment ; training costs ; skill biased technological change ; Labour supply ; Arbeitslosigkeit ; Qualifikation ; Humankapital ; Technischer Fortschritt ; Hochqualifizierte Arbeitskräfte ; Weiterbildung ; Insider-Outsider-Modell ; Ungelernte Arbeitskräfte ; Bildungsfinanzierung ; Potenzieller Wettbewerb ; Theorie ; Vergleich ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Muysken, Joan ; Zwick, Thomas
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/24384
• Last update: 10.03.2025, 11:44 AM CET