Wage risk and the skill premium

0568741 - NHÚ 2023 RIV GB eng J - Journal Article
Slavík, Ctirad - Yazici, H.
Wage risk and the skill premium.
Economic Journal. Roč. 132, č. 646 (2022), s. 2207-2230. ISSN 0013-0133. E-ISSN 1468-0297
Institutional support: RVO:67985998
Keywords : skill premium * wage risk * capital-skill complementarity
OECD category: Applied Economics, Econometrics
Impact factor: 3.2, year: 2022
Method of publishing: Limited access
https://doi.org/10.1093/ej/ueac015

The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.
Permanent Link: https://hdl.handle.net/11104/0340006


Research data: Zenodo