Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills

Matthias Doepke and Ruben Gaetani

No 27331, NBER Working Papers from National Bureau of Economic Research, Inc

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 where 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: E24 J24 J31 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-lma and nep-mac
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Citations: View citations in EconPapers (5)

Published as Matthias Doepke & Ruben Gaetani, 2024. "Why Didn’t the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills," American Economic Journal: Macroeconomics, vol 16(3), pages 268-309.

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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 (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)
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