Relative demand and supply of skills and wage rigidity in the United States, Britain, and Western Germany

authored by

Patrick A. Puhani

Abstract

I extend a two-skill group model by Katz and Murphy (1992) to estimate relative demand and supply for skills as well as wage rigidity in Germany. Using three data sets for Germany, two for Britain and one for the United States, I simulate the change in relative wage rigidity (wage compression) in all three countries during the early and mid 1990s, this being the period when unemployment increased in Germany but fell in Britain and the US. I show that in this period, Germany experienced wage compression (relative wage rigidity), whereas Britain and the US experienced wage decompression. This evidence is consistent with the Krugman (1994) hypothesis.

Organisation(s)

Institute of Labour Economics

Type

Contribution to book/anthology

Pages

573-585

No. of pages

13

Publication date

21.11.2016

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Economics, Econometrics and Finance(all), Business, Management and Accounting(all)

Sustainable Development Goals

SDG 8 - Decent Work and Economic Growth