Wage Inequality, Outsourcing, and Education
Source: National Taiwan University
This paper present a simple model to explain why wage inequality in the U.S. increased in the 1980s but decreased in the 1970s, in which the authors argue that educational investment might deteriorate wage inequality temporarily, but permanently decrease it. A country would not necessarily present the Kuznets inversed-U curve if having sufficient educational investment. Acceleration in the educational investment rate leads to an increasing supply of skilled labor and temporarily generates a higher technology growth rate, which might deteriorate the wage inequality in transition.