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GTAP Resource #1686

"Capital-Skill Complementarity and Rising Wage Inequality"
by Winchester, Niven and David Greenaway

Increased wage inequality has been a sensitive policy issue in OECD economies in recent decades. A shortcoming in the literature investigating its causes, especially with regard to the role of new technology, is that technical change is commonly determined residually. We address this limitation by specifying a computable general equilibrium (CGE) model that identifies four labour types and three capital assets. When capital assets are measured in efficiency units and there is capital-skill complementarity, we can explain a large component of the increase in UK wage inequality over the 1980-97 period in terms of changes in factor endowments. This result has implications for how policy makers might react to rising skill premiums.

JEL classifications: O3, J31, D58

Keywords: Capital-skill complementarity, wage inequality, CGE modelling

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2005 Conference Paper
Status: Published
By/In: Journal of Policy Modeling, 29, 41-54.
Date: 2007
Created: Winchester, N. (4/21/2005)
Updated: Winchester, N. (6/14/2007)
Visits: 2,728
No keywords have been specified.

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