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The trade-off between unemployment and wage inequality revisited
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SYSNO ASEP 0441233 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title The trade-off between unemployment and wage inequality revisited Author(s) Bičáková, Alena (NHU-C) RID Source Title Oxford Economic Papers-New Series - ISSN 0030-7653
Roč. 66, č. 4 (2014), s. 891-915Number of pages 15 s. Language eng - English Country GB - United Kingdom Keywords unemployment ; wage inequality ; labor supply Subject RIV AH - Economics Institutional support NHU-C - PRVOUK-P23 UT WOS 000343680200001 DOI 10.1093/oep/gpu015 Annotation The Krugman hypothesis attributes high wage inequality in the USA and high unemployment in continental Europe in the 1980s to the same negative change in the demand for the low skilled under different degrees of wage rigidity. This article revisits the hypothesis to explain the labour market developments in France, the UK, and the USA in the 1990s. I estimate a labour supply and labour demand model with heterogeneous types of labour to analyse the effects of market forces and wage rigidity on changes in skill-group labour market outcomes. The results provide evidence in favor of the Krugman hypothesis when France is compared to the USA and the UK. I also find support for an extended version of the Krugman hypothesis, which suggests that when labour supply is sensitive to wages, there is a trade-off between unemployment on one hand and wage inequality and inactivity on the other. Workplace Economics Institute - CERGE Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2015
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