Search results

This paper describes the changes in the composition of the labour force in the last 35 years and quantifies the substitution of low education/high experience workers by low experience/high education workers by using US [United States] and French microdata. The consequences of this substitution on the wage structure are then investigated. In the US, labour supply changes can explain the changes in returns to experience. It also accounts for a part of the increase in returns to education between 1980 and 2000, between eight per cent and 20 per cent depending on the specification. These results rely on panel estimates of a useful concept: the elasticity of substitution between experience and education, which is found to be less than half. In France, the covariations of prices and the supply of skills are consistent with a pure labour supply explanation. Methodologically, the paper shows that the use of a stock measure of efficient units of skill is better than flow measures (e.g. cohort size). It also allows to analyse the consequences of rising female labour participation.