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Solow and heterogeneous labor: A neoclassical explanation of wage inequality

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  • Meckl, Jürgen
  • Zink, Stefan

Abstract

The paper integrates human-capital investments of heterogeneous individuals into a neoclassical growth framework. The accumulation of physical capital changes relative factor prices and thus incentives to acquire skills, thereby altering the composition of the labor force. This interplay between the accumulation of human and physical capital provides a theoretical foundation for several important observations on wage inequality (e.g., the non-monotonic evolution of the skill premium) without having to hinge on specific exogenous shocks. Additional incorporation of wage rigidities emphasizes the trade off between residual wage inequality and employment opportunities for unskilled labor that is consistent with country-specific evidence.

Suggested Citation

  • Meckl, Jürgen & Zink, Stefan, 2001. "Solow and heterogeneous labor: A neoclassical explanation of wage inequality," Discussion Papers, Series I 312, University of Konstanz, Department of Economics.
    • Handle: RePEc:zbw:kondp1:312
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    2. Tamotsu Nakamura, 2022. "Stone–Geary type preferences and the long-run labor supply," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 169-188, April.
    3. Yasuoka, Masaya, 2020. "Subsidies for elderly care with a pay-as-you-go pension," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    4. Mikaela Backman & Lina Bjerke, 2014. "Returns to higher education: a regional perspective," Chapters, in: Charlie Karlsson & Börje Johansson & Kiyoshi Kobayashi & Roger R. Stough (ed.), Knowledge, Innovation and Space, chapter 10, pages 237-264, Edward Elgar Publishing.
    5. Kirill Borissov & Aleksey Minabutdinov & Roman Popov, 2024. "Ability Distribution and Dynamics of Wage Inequality: Unintended Consequences of Human Capital Accumulation," CER-ETH Economics working paper series 24/393, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. Masaya Yasuoka, 2013. "Subsidies for Elderly Care in Pay-As-You-Go Pension," Discussion Paper Series 109, School of Economics, Kwansei Gakuin University, revised Sep 2013.
    7. Atsushi Miyake & Kazunobu Muro & Tamotsu Nakamura & Masaya Yasuoka, 2009. "Between- and within-group wage inequalities, and the advent of new technology," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 387-394, December.
    8. Minoru Watanabe & Yusuke Miyake & Masaya Yasuoka, 2016. "Public Investment, Health Infrastructure and Income Growth," Applied Economics and Finance, Redfame publishing, vol. 3(3), pages 93-102, August.
    9. Masaya Yasuoka & Minoru Hayashida, 2015. "How should a government finance redistribution policies?," Discussion Paper Series 136, School of Economics, Kwansei Gakuin University, revised Oct 2015.
    10. Masaya Shintani & Masaya Yasuoka, 2019. "Fertility and Labor Share of Child Care Service," Discussion Paper Series 194, School of Economics, Kwansei Gakuin University.
    11. Kong, Dongmin & Liu, Shasha & Xiang, Junyi, 2018. "Political promotion and labor investment efficiency," China Economic Review, Elsevier, vol. 50(C), pages 273-293.

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    More about this item

    Keywords

    Wage inequality; human-capital investment; transitional adjustment dynamics;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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