UNDERSTANDING the SUPPLY and DEMAND FORCES behind the FALL and RISE in the US SKILL PREMIUM

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

I develop an assignment model to quantify, in a unified framework, the causal effects of supply and demand forces on the evolution of the college wage premium in the US economy. Specifically, I quantify the relative contributions of four different forces: (i) a within-sector non-neutral technological change, (ii) the creation of new high-skill services/sectors, (iii) polarizing product demand shifts, and (iv) shifts in the relative supply of skilled labor. The model considers endogenous human capital accumulation. I find that positive supply shifts completely explain the fall of the skill premium during the period 1970-1980. Demand forces play a major role in the post-1980 period, when the skill premium rises. Among the demand forces, the results show an increasing contribution of polarizing product demand shifts over the decades. On the other hand, the effect of the within-sector non-neutral technological change is more important in the earlier decades of the post-1980 period.

Original languageEnglish (US)
Pages (from-to)2191-2220
Number of pages30
JournalMacroeconomic Dynamics
Volume23
Issue number6
DOIs
StatePublished - Sep 1 2019

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'UNDERSTANDING the SUPPLY and DEMAND FORCES behind the FALL and RISE in the US SKILL PREMIUM'. Together they form a unique fingerprint.

Cite this