Wages, Skills, and Technology in the United States and Canada

43 Pages Posted: 21 Dec 1998 Last revised: 10 Oct 2010

See all articles by Kevin M. Murphy

Kevin M. Murphy

University of Chicago; National Bureau of Economic Research (NBER)

W. Craig Riddell

University of British Columbia (UBC) - Department of Economics

Paul M. Romer

National Bureau of Economic Research (NBER)

Date Written: July 1998

Abstract

Wages for more- and less-educated workers have followed strikingly different paths in the U.S. and Canada. During the 1980's and 1990's, the ratio of earnings of university graduates to high school graduates increased sharply in the U.S. but fell slightly in Canada. Katz and Murphy (1992) found that for the U.S. a simple supply-demand model fit the pattern of variation in the premium over time. We find that the same model and parameter estimates explain the variation between the U.S. and Canada. In both instances, the relative demand for more-educated labor shifts out at the same, consistent rate. Both over time and between countries, the variation in rate of growth of relative wages can be explained by variation in the relative supply of more-educated workers. Many economists suspect that technological change is causing the steady increases in the relative demand for more-educated labor. If so, these data provide independent evidence on the spatial and temporal variation in the pattern of technological change. Whatever is causing this increased demand for skill, the evidence from Canada suggest that increases in educational attainment and skills can reduce the rate at which relative wages diverge.

Suggested Citation

Murphy, Kevin M. and Riddell, W. Craig and Romer, Paul M., Wages, Skills, and Technology in the United States and Canada (July 1998). NBER Working Paper No. w6638. Available at SSRN: https://ssrn.com/abstract=123177

Kevin M. Murphy (Contact Author)

University of Chicago ( email )

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W. Craig Riddell

University of British Columbia (UBC) - Department of Economics ( email )

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Canada
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Paul M. Romer

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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