In this paper, we use a multi-sector specific factors model with international capital mobility to examine the effects of globalization on the skill premium in U.S. manufacturing industries. This model allows us to identify two channels through which globalization affects relative wages: effects of international capital flows transmitted through changes in interest rates, and effects of international...

This paper is primarily concerned with the impacts of population aging upon education and skill premium. To study population aging, we utilize an overlappinggeneration model where survival into the old stage is uncertain and population aging is modelled via a higher survival rate. Featuring the household, education and production sectors, our model is analysed under both autarky and two-country...

The stylized facts suggest a negative relationship between tax progressivity and the skill premium from the early 1960s until the early 1990s, and a positive one thereafter. They also generally imply rising tax progressivity, except for the 1980s. In this paper, we ask whether optimal tax policy is consistent with these observations, taking into account the demographic and technological factors...

This paper quantitatively examines the e¤ects of two exogenous driving forces, investment-speci…c technological change (ISTC) and the demographic change known as “the baby boom and the baby bust,”on the evolution of the skill premium in the postwar U.S. economy. I develop an overlapping generations general equilibrium model with endogenous discrete schooling choice. The production technology fe...

The gap between the rich and the poor is rising. During the past 30 years, this difference has been especially pronounced between college graduates and non-college graduates. The ratio of skilled (college educated) wages to unskilled (non-college graduate) wages is called the skill premium, and it has also increased over the past 30 years. The increase in the skill premium has continued despite...

In “Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis,” Krusell et al. (2000) analyzed the capital-skill complementarity hypothesis as an explanation for the behavior of the U.S. skill premium. This paper shows that their model’s fit and the values of the estimated parameters are very sensitive to the data used: Alternative measures of the capital series predict skill premi...

In a two-cone Heckscher–Ohlin model with CES preferences and a continuum of goods, new northern goods increase the northern skill premium if they are skilled-labor intensive, and may increase the premium if they are unskilled-labor intensive. Thus, the introduction of new goods into US technology could have done more to increase the US skill premium than a closed-economy model would predict. I ...

Abstract The skill premium has increased significantly in the United States last five decades. During same period, individual wage risk also increased. This paper proposes a mechanism through which rise increases premium. Intuitively, uninsured precautionary savings, thereby boosting capital accumulation, due to capital-skill complementarity. Using quantitative macroeconomic model, we find that...