Do skills matter for wage inequality?

Stijn Broecke

IZA World of Labor, 2016, No 232, 232

Abstract: Policymakers in many OECD countries are increasingly concerned about high and rising inequality. Much of the evidence (as far back as Adam Smith’s The Wealth of Nations) points to the importance of skills in tackling wage inequality. Yet a recent strand of the research argues that (cognitive) skills explain little of the cross-country differences in wage inequality. Does this challenge the received wisdom on the relationship between skills and wage inequality? No, because this recent research fails to account for the fact that the price of skill (and thus wage inequality) is determined to a large extent by the match of skill supply and demand.

Keywords: skills; wage inequality; labor market institutions (search for similar items in EconPapers)
JEL-codes: I24 J08 J24 J31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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