Will the skill-premium in the Netherlands rise in the next decades?

A. Dupuy*

*Corresponding author for this work

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While the skill-premium has been rising sharply in the us and the uk for 20 years, the dutch skill-premium decreased for much of that period and only started to rise in the early 90s. In this article, we investigate whether the dutch skill-premium will rise in the next decades. To answer this question, we forecast the skill-premium using the katz and murphy (1992 katz, l and murphy, k. 1992. Changes in relative wages, 1963–1987: supply and demand factors. Quarterly journal of economics, 107: 35–78. [crossref], [web of science ®], , [google scholar]) and the krusell et al. (2000 krusell, p, ohanian, l, ríos-rull, j-v and violante, g. 2000. Capital-skill complementarity and inequality: a macroeconomic analysis. Econometrica, 68: 1029–53. [crossref], [web of science ®], , [google scholar]) models. The katz and murphy model (km) explains demand shifts by skill-biased technological change in unobservable variables captured by a time trend. In contrast, the krusell et al. Model (korv) explains demand shifts by (observable) changes in the capital stock under a capital-skill complementarity technology. The results show that while the km model predicts that the skill-premium will have increased by 30% in 2020, based on realistic predictions of the stock of capital, the korv model predicts that the skill-premium will remain between -5 and +5% of its 1996 level.
Original languageEnglish
Pages (from-to)2723-2731
Number of pages9
JournalApplied Economics
Issue number21
Publication statusPublished - 1 Jan 2007

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