A vast literature aimed at understanding the nature and causes of wage inequality focuses on the skill premium as a key object of interest. In an environment where both the skill premium and the share of skilled workers are changing, however, the between-skill-group component of inequality may...

This paper analyzes whether technological change improves equality of labor market opportunities by decreasing returns to parental background. We find that in Germany during the 1990s, computerization improved the access to technologyadopting occupations for workers with low-educated parents,...

The secular shift in labor demand from unskilled to skilled labor is explained within a model that is solved numerically. There are three branches producing a basic good, a differentiated luxury good, and an intermediate service. Production is more skill-intensive in the luxury good and the...

The canonical supply-demand model of the wage returns to skill has been extremely influential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive...

A key parameter in the analysis of wage inequality is the elasticity of substitution between skilled and unskilled labor. We question the common view that the elasticity exceeds 1. Two biases, publication and attenuation, conspire to pull the mean elasticity reported in the literature to 1.9....

This study investigates the dynamics of between-group and within-group wage inequality in a model with heterogeneous learning abilities putting a key emphasis on the shape of the ability distribution. In our model, intergenerational human capital externalities incentivize individuals to invest...

We explore the far-reaching implications of low-wage subsidies on aggregate employment. Low-wage subsidies have three important effects. First, they promote employment of unskilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff of unskilled work relative to...

This paper investigates the evolution of wages and the recent tendency to rising wage inequality in Germany, based on the German Socio-Economic Panel (GSOEP) for 1984 to 2004. Between 1984 and 1994 the wage distribution was fairly stable. Wage inequality started to increase around 1994 in...

The paper investigates the evolution of wages and wage inequality in Germany based on samples from the German Socio-Economic Panel (GSOEP) 1984 to 2005. Real gross hourly wages for prime age dependent male workers increased on average by 23 percent between 1984 and 1994 in West Germany and the...