Institutions, Technological Change and Wage Differentials between Skilled and Unskilled Workers: Theory and Evidence from Europe

Research in Labor Economics

ISBN: 978-1-78190-357-5, eISBN: 978-1-78190-358-2

ISSN: 0147-9121

Publication date: 26 November 2012


This article studies the evolution of the wage differentials between graduate (skilled) and non-graduate (unskilled) workers in several European countries from the beginning of the 1990s to the beginning of this century. The starting point is that all European countries show a common increase in the relative supply of skilled workers but different evolution of wage differentials. Economics theory usually relates the evolution of wage differentials not only to relative supply but also to skill-biased technological progress. I complement this explanation providing a theoretical model of wage bargaining where wage differentials are determined also by labour market institutions. My empirical findings show that both technological progress and labour market institutions are important in the determination of wage differentials. As for the former, I find that differentials depend on the pace and intensity at which technological progress takes place. As for labour market institutions, their effect, though important, is not always straightforward. In fact, some aspects of institutions, like minimum wage and the duration of unemployment benefits, favour unskilled workers while other aspects, like bargaining power and replacement rates from unemployment benefits, may magnify the differences in outside options and actually increase wage differentials.



Corsini, L. (2012), "Institutions, Technological Change and Wage Differentials between Skilled and Unskilled Workers: Theory and Evidence from Europe", Polachek, S. and Tatsiramos, K. (Ed.) Research in Labor Economics (Research in Labor Economics, Vol. 36), Emerald Group Publishing Limited, Bingley, pp. 1-33.

Download as .RIS



Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.