Natural rate theory has dominated interpretations of economic trends and policy prescriptions over many decades, as economists contrasted high unemployment and lower inequality in Europe with the great American job machine. This paper discusses the relationship between skill structure and wage...

Germany's more compressed wage structure is taken by many analysts as the main cause of the German-US difference in job creation. We find that the US has a more dispersed level of skills than Germany but even adjusted for skills, Germany has a more compressed wage distribution than the US. The...