Explaining International Differences in Male Wage Inequality by Differences in Demand and Supply of Skill

30 Pages Posted: 16 Apr 2001

See all articles by Edwin Leuven

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB); IZA Institute of Labor Economics

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute Amsterdam (TIA); Institute for the Study of Labor (IZA)

Abstract

Wage differentials between skill groups are larger in the US than in most western European countries. Especially low skilled workers are relatively worse off in the US than elsewhere. A simple demand and supply explanation for this fact would be that relative net supply of low skilled workers in the US exceeds that of other countries. The study by Blau and Kahn (1996) rejects this explanation. The present paper shows that this rejection depends heavily on the measure of skill that has been used. Blau and Kahn measure a worker's skill level as a weighted average of his schooling level and experience. Using this measure for comparisons across countries assumes that years of schooling and experience mean the same in terms of skill in all countries. When we use a measure of skill that is arguably more fit for international comparisons we find reasonable support for a demand and supply explanation of differences in wage inequality. This findings survives a large number of sensitivity tests.

Suggested Citation

Leuven, Edwin and Oosterbeek, Hessel, Explaining International Differences in Male Wage Inequality by Differences in Demand and Supply of Skill. Available at SSRN: https://ssrn.com/abstract=265188 or http://dx.doi.org/10.2139/ssrn.265188

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Hessel Oosterbeek (Contact Author)

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 4242 (Phone)
+31 20 525 5283 (Fax)

HOME PAGE: http://www.fee.uva.nl/scholar/oosterbeek/

Tinbergen Institute Amsterdam (TIA)

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Institute for the Study of Labor (IZA)

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
104
Abstract Views
1,488
rank
281,129
PlumX Metrics