Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills

Matthias Doepke and Ruben Gaetani

No 14846, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Why has the college wage premium risen rapidly in the United States since the 1980s, but not in European economies such as Germany? We argue that differences in employment protection can account for much of the gap. We develop a model in which firms and workers make relationship-specific investments in skill accumulation. The incentive to invest is stronger when employment protection creates an expectation of long-lasting matches. We argue that changes in the economic environment have reduced relationship-specific investment for less-educated workers in the United States, but not for better-protected workers in Germany.

Keywords: College wage premium; Employment protection; Job-specific skills (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills (2024)
Working Paper: Why didn’t the college premium rise everywhere? Employment protection and on-the-job investment in skills (2024)
Working Paper: Why Didn’t the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills (2020)
Working Paper: Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills (2020)
Working Paper: Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills (2020)
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