Precautionary Demand for Education, Inequality, and Technological Progress

Posted: 22 Jul 2002

See all articles by Eric D. Gould

Eric D. Gould

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Omer Moav

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR)

Bruce A. Weinberg

Ohio State University (OSU) - Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

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Abstract

This paper offers an explanation for the evolution of wage inequality within and between industries and education groups over the past several decades. The model is based on the disproportionate depreciation of technology-specific skills versus general skills due to technological progress, which occurs randomly across sectors. Consistent with empirical evidence, the model predicts that increasing randomness is the primary source of inequality growth within uneducated workers, whereas inequality growth within educated workers is determined more by changes in the composition and return to ability. Increasing randomness generates a "precautionary" demand for education, which we show empirically to be significant.

JEL Classification: J31, O11, O33, O40

Suggested Citation

Gould, Eric D. and Moav, Omer and Weinberg, Bruce A., Precautionary Demand for Education, Inequality, and Technological Progress. Journal of Economic Growth, Vol. 6, No. 4, Pp. 285-315, December 2001. Available at SSRN: https://ssrn.com/abstract=319524

Eric D. Gould (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3247 (Phone)
+972 2 581 6071 (Fax)

HOME PAGE: https://sites.google.com/site/edgould

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Omer Moav

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www2.warwick.ac.uk/fac/soc/economics/staff/academic/moav

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bruce A. Weinberg

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States
614-292-6701 (Phone)
614-292-3906 (Fax)

Institute for the Study of Labor (IZA)

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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