Published in:CERGE-EI Working Paper Series ; No. 609
Extent:
1 Online-Ressource (52 p)
Language:
English
DOI:
10.2139/ssrn.3084339
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 1, 2017 erstellt
Description:
The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications