Economic Policy Review
Macroeconomic Implications of Shifts in the Relative Demand for Skills
January 1995 Volume 1, Number 1
JEL classification: J31, J64, E62

Author: Olivier Blanchard

Besides widening wage inequality, if the demand for skills continues to increase it will probably reduce aggregate employment. Policy measures to offset the impact of increased demand for skills on wage inequality and employment would be very costly. Moreover, given local funding of primary and secondary education a sufficiently large supply response cannot be assumed.

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