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Wage Dispersion, Over-Qualification, and Reder Competition

By Ekkehart Schlicht, Jel J, The Thanks Knut Gerlach, Johannes Ludsteck, Peter Skott and Christoph Stoeckle


The expansion of higher education in the Western countries has been accompanied by a marked widening of wage differentials and increasing over-qualification. While the increase in wage differentials has been attributed to skill-biased technological change that made advanced skills scarce, this explanation does not fit well with the observed increase in over-qualification which suggests that advanced skills are in excess supply. By “Reder-competition ” I refer to the simultaneous adjustment of wage offers and hiring standards in response to changing labor market conditions. I present a simple model of Reder competition that depicts wages as driven by labor heterogeneity, rather than scarcity. The mechanism may give rise to a simultaneous increase in wage differentials and over-qualification

Topics: Hiring standards, employment criteria, selection wages, efficiency wages, mobility, skillbiased technological change, heterogeneity-biased technological change, over-qualification, overeducation
Year: 2007
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