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Trading up and the skill premium


Jaimovich, Nir; Rebelo, Sergio; Wong, Arlene; Zhang, Miao Ben (2019). Trading up and the skill premium. NBER Working Paper Series 25931, National Bureau of Economic Research (NBER).

Abstract

We study the impact on the skill premium of increases in the quality of goods consumed by households(“trading up”). Our empirical work shows that high- quality goods are more intensive in skilled laborthan low-quality goods and that household spending on high-quality goods rises with income. Wepropose a model consistent with these facts. This model accounts for the past rise in the skill premiumwith more plausible rates of skill-biased technical change than those required by the canonical model.It also implies that an expansion of the skilled labor force reduces the skill premium by much lessthan in the canonical model.

Abstract

We study the impact on the skill premium of increases in the quality of goods consumed by households(“trading up”). Our empirical work shows that high- quality goods are more intensive in skilled laborthan low-quality goods and that household spending on high-quality goods rises with income. Wepropose a model consistent with these facts. This model accounts for the past rise in the skill premiumwith more plausible rates of skill-biased technical change than those required by the canonical model.It also implies that an expansion of the skilled labor force reduces the skill premium by much lessthan in the canonical model.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:J2, O4
Language:English
Date:June 2019
Deposited On:25 Sep 2019 13:06
Last Modified:26 Sep 2019 03:14
Series Name:NBER Working Paper Series
Number of Pages:40
OA Status:Closed
Publisher DOI:https://doi.org/10.3386/w25931
Official URL:https://www.nber.org/papers/w25931
Other Identification Number:merlin-id:18218

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