American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills
American Economic Journal: Macroeconomics
vol. 16,
no. 3, July 2024
(pp. 268–309)
Abstract
Why has the college wage premium risen rapidly in the United States since the 1980s but not in European economies such as Germany? We argue that differences in employment protection can account for much of the gap. We develop a model in which firms and workers make relationship-specific investments in skill accumulation. The incentive to invest is stronger when employment protection creates an expectation of long-lasting matches. We argue that changes in the economic environment have reduced relationship-specific investment for less educated workers in the United States, but not for better-protected workers in Germany.Citation
Doepke, Matthias, and Ruben Gaetani. 2024. "Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills." American Economic Journal: Macroeconomics, 16 (3): 268–309. DOI: 10.1257/mac.20210120Additional Materials
JEL Classification
- I23 Higher Education; Research Institutions
- I26 Returns to Education
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J41 Labor Contracts
- J63 Labor Turnover; Vacancies; Layoffs
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