Wage Dispersion and Overqualification as Entailed by Reder Competition

26 Pages Posted: 29 Nov 2010

See all articles by Ekkehart Schlicht

Ekkehart Schlicht

University of Munich - Department of Economics; IZA Institute of Labor Economics

Date Written: 2007

Abstract

The expansion of higher education in the Western countries has been accompanied by a marked widening of wage differentials and increasing overqualification. While the increase in wage differentials has been attributed to skill-biased technological change that made advanced skills scarce, this explanation does not fit well with the observed increase in overqualification which suggests that advanced skills are in excess supply. By "Reder-competition" I refer to the simultaneous adjustment of wage offers and hiring standards in response to changing labor market condition. I present a simple model of Reder competition that reproduces the simultaneous increase in wage differentials and overqualification in response to an increase in education.

Keywords: Hiring standards, employment criteria, selection wages, efficiency wages, mobility, skillbiased technical change, overeducation, wage dispersion

JEL Classification: D43, J63, J31

Suggested Citation

Schlicht, Ekkehart, Wage Dispersion and Overqualification as Entailed by Reder Competition (2007). Economics Discussion Paper No. 2007-22. Available at SSRN: https://ssrn.com/abstract=1716382 or http://dx.doi.org/10.2139/ssrn.1716382

Ekkehart Schlicht (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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