Why didn’t the college premium rise everywhere? Employment protection and on-the-job investment in skills

Matthias Doepke and Ruben Gaetani

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: I20 I23 J24 J31 J41 J63 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-07-01
New Economics Papers: this item is included in nep-his, nep-ltv and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Economic Journal: Macroeconomics, 1, July, 2024, 16(3), pp. 268 – 309. ISSN: 1945-7707

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http://eprints.lse.ac.uk/121605/ Open access version. (application/pdf)

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 (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)
Working Paper: Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121605

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