ABSTRACT
In the United States, which along with the United Kingdom marked the most dramatic upsurge in earnings inequality among OECD countries, these changes corresponded to increases in wage dispersion both within and across cohorts defined by educational attainment and labor market experience. The potential contribution of P. Skott and P. Auerbach’s formal approach to wage dispersion and unemployment might be assessed on at least two grounds. One might ask whether Skott and Auerbach provide the most compelling alternative to the skill-biased technical change explanation for increased wage inequality and related phenomena, were the latter account to be rejected on empirical grounds. Skott and Auerbach provide a formally straightforward and fruitful basis for framing ideas about trends in wage dispersion, unemployment, and the connection between job requirements and worker skills. In Skott and Auerbach’s account, increased unemployment and wage dispersion are unambiguously associated with increased overeducation, as displaced high-skill workers take over jobs formerly held by their low-skill counterparts.
