Capital-skill complementarity and inequality: Twenty years after

Lilia Maliar, Serguei Maliar and Inna Tsener

Economics Letters, 2022, vol. 220, issue C

Abstract: We revisit a seminal capital-skill complementarity analysis of Krusell et al. (2000). We extended their 1963–1992 data set to include the 1992–2017 period. We find that over the recent years, the skill premium pattern changed dramatically, from a U-shaped to a monotonically increasing. However, the capital-skill complementarity framework remains remarkably successful in explaining the data. This is true even when the model is estimated using a significantly declining labor share as in Karabarbounis and Neiman (2014). We finally construct a projection for skill premium for 2017–2037, and we conclude that the inequality will continue to grow in the US economy.

Keywords: Skill premium; Capital-skill complementarity; CES production function; Skilled and unskilled labor (search for similar items in EconPapers)
JEL-codes: C73 D90 E21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Capital-Skill Complementarity and Inequality: Twenty Years After (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003184

DOI: 10.1016/j.econlet.2022.110844

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