I am grateful for many useful discussions with and suggestions by Mahmood Arai, Harry Flam, Per Krusell, Kjetil Storesletten, Gianluca Violante, Hans Wijkander and two anonymous referees. I would also like to thank Peter Fredriksson for providing data on the Swedish university wage premium, Gianluca Violante for providing the original Gauss program used in ‡, and Gabriella Sjögren for help in assembling the SLLS dataset. Financial support from the Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged.
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Capital–Skill Complementarity and Inequality in Sweden
Article first published online: 16 DEC 2005
DOI: 10.1111/j.1467-9442.2005.00425.x
Additional Information
How to Cite
Lindquist, M. J. (2005), Capital–Skill Complementarity and Inequality in Sweden. The Scandinavian Journal of Economics, 107: 711–735. doi: 10.1111/j.1467-9442.2005.00425.x
Publication History
- Issue published online: 16 DEC 2005
- Article first published online: 16 DEC 2005
- First version submitted March 2003; final version received August 2004.
- Abstract
- Article
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- Cited By
Keywords:
- Capital–skill complementarity;
- inequality;
- relative wages;
- skill premium;
- university wage premium
- J 31
Abstract
Income inequality increased in Sweden during the 1980s and 1990s, as did the returns to higher education. The main conclusion of this study is that increased income inequality between high- and low-skilled workers is demand driven and is due to the presence of capital–skill complementarity in production. Increased investments in new, more efficient capital equipment, along with a slowdown in the growth rate of skilled labor, have raised the ratio of effective capital inputs per skilled worker, which, in turn, has increased the relative demand (and market return) for skilled labor through the capital–skill complementarity mechanism.