Solow and Heterogeneous Labour: A Neoclassical Explanation of Wage Inequality

19 Pages Posted: 9 Oct 2004

See all articles by Jürgen Meckl

Jürgen Meckl

University of Konstanz; IZA Institute of Labor Economics

Stefan Zink

University of Konstanz

Abstract

This paper analyses the effect of human-capital investments of heterogeneous individuals on the dynamics of the wage structure within a neoclassical growth model. The accumulation of physical capital changes relative factor prices and thus incentives to acquire skills, thereby altering the composition of the labour force. Without relying on exogenous shocks, our framework generates dynamics that resemble important observations on wage inequality (e.g., the non-monotone evolution of the skill premium). Additional incorporation of wage rigidities emphasises the trade off between residual wage inequality and employment opportunities for unskilled labour that is consistent with country-specific evidence.

Suggested Citation

Meckl, Jürgen and Zink, Stefan, Solow and Heterogeneous Labour: A Neoclassical Explanation of Wage Inequality. Available at SSRN: https://ssrn.com/abstract=597854

Jürgen Meckl (Contact Author)

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

IZA Institute of Labor Economics

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

Stefan Zink

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
678
PlumX Metrics