Supply and Demand, Allocation and Wage Inequality: An International Comparison

35 Pages Posted: 2 Dec 2003

See all articles by Arnaud Dupuy

Arnaud Dupuy

Centre de Recherche en Économie Appliquée (CREA)

Lex Borghans

Maastricht University - Department of Economics; University of Maastricht - Research Centre for Education and the Labour Market (ROA); IZA Institute of Labor Economics

Date Written: October 2003

Abstract

In this paper, we develop an allocation model of workers differentiated by their field of study to test whether international differences in the wage structure can be explained by differences in labor demand and supply in each country. The model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment for one occupation from real supply-demand effects. Empirical results based on data for nine countries show that cross-country differences in wage inequality explain at least 2/3 of the differences in labor demand and supply.

Keywords: allocation, wage inequality

JEL Classification: J21, J23, J31

Suggested Citation

Dupuy, Arnaud and Borghans, Lex, Supply and Demand, Allocation and Wage Inequality: An International Comparison (October 2003). Available at SSRN: https://ssrn.com/abstract=464602

Arnaud Dupuy (Contact Author)

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Lex Borghans

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

University of Maastricht - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

IZA Institute of Labor Economics

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

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