Arbeitspapier
Skilled and Unskilled Labor Are Less Substitutable than Commonly Thought
A key parameter in the analysis of wage inequality is the elasticity of substitution between skilled and unskilled labor. We question the common view that the elasticity exceeds 1. Two biases, publication and attenuation, conspire to pull the mean elasticity reported in the literature to 1.9. After correcting for the biases, the literature is consistent with the elasticity in the US of 0.6--0.9. Our analysis relies on 729 estimates of the elasticity collected from 76 studies as well as 37 controls that reflect the context in which the estimates were obtained. We use recently developed nonlinear techniques to correct for publication bias and employ Bayesian and frequentist model averaging to address model uncertainty. Our results suggest that, first, insignificant estimates of the elasticity are underreported. Second, because researchers typically estimate the elasticity's inverse, measurement error exaggerates the elasticity, and we show the exaggeration is substantial. Third, elasticities are systematically larger for developed countries, translog estimation, and methods that ignore endogeneity.
- Language
-
Englisch
- Classification
-
Wirtschaft
Labor Demand
Human Capital; Skills; Occupational Choice; Labor Productivity
- Subject
-
Elasticity of substitution
skill premium
meta-analysis
model uncertainty
publication bias
- Event
-
Geistige Schöpfung
- (who)
-
Havranek, Tomas
Irsova, Zuzana
Laslopova, Lubica
Zeynalova, Olesia
- Event
-
Veröffentlichung
- (who)
-
ZBW – Leibniz Information Centre for Economics
- (where)
-
Kiel, Hamburg
- (when)
-
2020
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Havranek, Tomas
- Irsova, Zuzana
- Laslopova, Lubica
- Zeynalova, Olesia
- ZBW – Leibniz Information Centre for Economics
Time of origin
- 2020
Other Objects (12)
Skilled and unskilled labor are less substitutable than commonly thought
Demand for gasoline is more price-inelastic than it is commonly thought
Metacognitive awareness of skilled and less-skilled EFL writers
Scaling-up skilled intentionality to linguistic thought
Are volcanic melts less viscous than we thought? The case of Stromboli basalt
Do High-Skilled Immigrants find Jobs Faster than Low-Skilled Immigrants?
Plant species cannot escape climate change but may be less vulnerable than previously thought (Briefing 3.3)
Remittances and the brain drain: skilled migrants do remit less
Remittances and the Brain Drain: Skilled Migrants Do Remit Less!
Remittances and the brain drain: skilled migrants do remit less
My BSD sucks less than yours
Terraform - A more versatile tool, than you thought
Skilled and unskilled labor are less substitutable than commonly thought
Demand for gasoline is more price-inelastic than it is commonly thought
Metacognitive awareness of skilled and less-skilled EFL writers
Scaling-up skilled intentionality to linguistic thought
Are volcanic melts less viscous than we thought? The case of Stromboli basalt
Do High-Skilled Immigrants find Jobs Faster than Low-Skilled Immigrants?
Plant species cannot escape climate change but may be less vulnerable than previously thought (Briefing 3.3)
Remittances and the brain drain: skilled migrants do remit less
Remittances and the Brain Drain: Skilled Migrants Do Remit Less!
Remittances and the brain drain: skilled migrants do remit less
My BSD sucks less than yours
Terraform - A more versatile tool, than you thought
Skilled and unskilled labor are less substitutable than commonly thought
Demand for gasoline is more price-inelastic than it is commonly thought
Metacognitive awareness of skilled and less-skilled EFL writers
Scaling-up skilled intentionality to linguistic thought
Are volcanic melts less viscous than we thought? The case of Stromboli basalt
Do High-Skilled Immigrants find Jobs Faster than Low-Skilled Immigrants?
Plant species cannot escape climate change but may be less vulnerable than previously thought (Briefing 3.3)
Remittances and the brain drain: skilled migrants do remit less
Remittances and the Brain Drain: Skilled Migrants Do Remit Less!
Remittances and the brain drain: skilled migrants do remit less
My BSD sucks less than yours