Will the Skill-Premium in the Netherlands Rise in the Next Decades?

Arnaud Dupuy ()

No 2708, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: While the skill-premium has been rising sharply in the US and the UK for 20 years, the Dutch skill-premium decreased for much of that period and only started to rise in the early 90s. In this paper, we investigate whether the Dutch skill-premium will rise in the next decades. To answer this question, we forecast the skill-premium using the Katz and Murphy (1992) and the Krusell et al. (2000) models. The Katz and Murphy model (KM) explains demand shifts by skill-biased technological change in unobservable variables captured by a time trend. In contrast, the Krusell et al. model (KORV) explains demand shifts by (observable) changes in the capital stock under a capital-skill complementarity technology. The results show that while the KM model predicts that the skill-premium will have increased by 30% in 2020, based on realistic predictions of the stock of capital, the KORV model predicts that the skill-premium will remain between -5% and +5% of its 1996 level.

Keywords: skill-biased technical change; capital-skill complementarity; skill-premium (search for similar items in EconPapers)
JEL-codes: D33 J11 J38 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-03
New Economics Papers: this item is included in nep-for
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Citations: View citations in EconPapers (7)

Published - published in: Applied Economics, 2007, 39 (21), 2723-31

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Journal Article: Will the skill-premium in the Netherlands rise in the next decades? (2007)
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