2024/06/28 by Matthias Doepke, Ruben Gaetani · 1 voice
Economics, Econometrics and Finance · #Labor market dynamics and wage inequality #German Economic Analysis & Policies #Economic Policies and Impacts
paper · pdf · doi:10.1257/mac.20210120
openalex publication_date 2024/06/28 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
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. (JEL I23, I26, J24, J31, J41, J63)