The Demand-Supply-Demand Twist: How the Wage Structure Got More Convex

Chiara Binelli ()

Working Paper Series from The Rimini Centre for Economic Analysis

Abstract: In the 1990s, in many countries, log wages became a more convex function of education: returns to college increased and returns to intermediate education declined. This paper argues that an important cause of this convexi cation was a two-stage demand-supply interaction: an increased demand for both sorts of educated workers stimulated a supply response; the increased supply of intermediate-educated further increased the demand for college-educated workers, because these two types of labour are complementary. This argument is supported by an empirical equilibrium model of savings and educational choices for Mexico, where the degree of convexi cation was ampli ed by loosening credit constraints.

Keywords: Wage Inequality; Human Capital; Empirical Equilibrium Model; Latin America (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 C68 (search for similar items in EconPapers)
Date: 2009-01, Revised 2009-01
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Persistent link: http://EconPapers.repec.org/RePEc:rim:rimwps:48_09

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