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The market for 'rough diamonds' : information, finance and wage inequality in macroeconomics
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Koutmeridis, Theodore (2013) The market for 'rough diamonds' : information, finance and wage inequality in macroeconomics. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b2691227~S1
Abstract
During the past four decades both between and within group wage inequality increased
significantly in the US. Three of the most well-documented facts concern the increase
in the education premium, the rise in the experience premium and the narrowing gender
wage gap. Existing studies explain some of them separately but there is no unified
explanation of all three at the same time.
I provide a microfounded justification for the first two, by introducing private employer
learning in a signaling model with credit constraints. I show that when financial
constraints relax, talented individuals can acquire education and leave the uneducated
pool. This implies that the eventual group of uneducated young workers becomes of
lower average quality, as most of the rough diamonds have now been plucked out of this
group. My explanation is consistent with US data from 1970's to 2000's, indicating that
the rise in the education and the experience premium coincides with a fall in unskilled inexperienced
wages, while at the same time skilled or experienced wages do not change
much. The model accounts also for the fact that the education premium increases more
for low-experienced workers, while the experience premium increases only for the low-educated
ones.
The introduction of gender-specific credit constraints, explains also the narrowing
gender wage gap, by allowing the cost of borrowing to decline and become more similar
for the two genders recently, while in the past it was much costlier for women. More
equal borrowing opportunities for men and women, decrease inequality between genders,
however they also increase inequality within gender by boosting the wage gap between
different education and experience groups for both sexes.
This theory explains the puzzling coexistence of increasing meritocracy and growing
wage inequality in the American society, by highlighting the conflict between equal opportunities
and substantial economic equality.
Item Type: | Thesis (PhD) | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
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Library of Congress Subject Headings (LCSH): | Macroeconomics, Income distribution -- United States, Wages -- Effect of education on -- United States, Pay equity -- United States | ||||
Official Date: | July 2013 | ||||
Dates: |
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Institution: | University of Warwick | ||||
Theses Department: | Department of Economics | ||||
Thesis Type: | PhD | ||||
Publication Status: | Unpublished | ||||
Supervisor(s)/Advisor: | Becker, Sasha O.; Santos-Monteiro, Paolo | ||||
Sponsors: | Royal Economic Society (Great Britain); University of Warwick; Alexander S. Onassis Public Benefit Foundation | ||||
Extent: | ix, 166 leaves : illustrations. | ||||
Language: | eng |
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