A Welfare Analysis of Policy Responses to the Skilled Wage Premium

William Blankenau ()

Review of Economic Dynamics, 1999, vol. 2, issue 4, 820-849

Abstract: I build a model with heterogeneous agents which is consistent both with rising wage inequality across education levels and with an increasing relative number of college graduates. I use the model to investigate the welfare implications of policies which influence the structure of net wages. Each policy affects agents directly through taxes and subsides and indirectly as wages respond to changes in the relative supply of skilled and unskilled workers. I find that as wage inequality grows due to skill-biased technological change, policies which promote a more egalitarian wage structure can become increasingly acceptable to all agents and that for nearly all agents, education subsidies may be preferred to direct transfers as a means of decreasing wage inequality. (Copyright: Elsevier)

Keywords: wage inequality; heterogenity; education subsidies; welfare analysis (search for similar items in EconPapers)
JEL-codes: E60 H52 I28 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (11)

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DOI: 10.1006/redy.1999.0061

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