Supply and demand factors in understanding the educational earnings differentials: West Germany and the United States

This paper uses data from the March Current Population Survey and German Socio-Economic Panel to investigate the role of market forces and the institutional constraints in explaining the educational earnings differentials in the United States and West Germany. We make use of simple supply and demand...

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Bibliographic Details
Published in:The European journal of comparative economics : EJCE 2011-12, Vol.8 (2), p.235-263
Main Author: Ozturk, Gulgun Bayaz
Format: Article
Language:English
Subjects:
Analysis
Arbeitskräfteangebot
Arbeitskräftebedarf
Bildungsertrag
Comparative analysis
Compensation
Compensation and benefits
Demand
Determinante
Deutschland
Earnings
Earnings differentials
Education
Educational attainment
Einkommensunterschied
Employees
Employment
Erwerbstätiger
Erwerbstätigkeit
Frau
Germany
Institution
Internationaler Vergleich
Labor market
polarization
Qualifikationsstruktur
relative demand and supply of skills
skill premium
Skilled labor
Skilled workers
Studies
Supply
Supply & demand
Tarifverhandlung
U.S.A
USA
Wage differential
Wage differentials
Westdeutschland
Western Europe
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Summary:This paper uses data from the March Current Population Survey and German Socio-Economic Panel to investigate the role of market forces and the institutional constraints in explaining the educational earnings differentials in the United States and West Germany. We make use of simple supply and demand framework to differentiate the effects of market forces from wage-setting institutions. Results indicate that differential growth in the relative employment of skilled workers is responsible for the differences in returns to skill in both countries over the period of analysis. In particular, rising educational attainment is the major factor underlying the changes in the employment of skilled workers in each country and it is followed by institutional factors. However, in addition to the differential growth in relative demand for skilled labor, differences in wage-setting institutions explain most of the cross-country differences in skill premia. We also provide evidence for polarization of jobs which is a recent phenomenon in both labor markets.
ISSN:1722-4667
1824-2979
1824-2979