The proportion of UK people with university degrees tripled between 1993 and 2015. However, over the same period the time trend in the college wage premium has been extraordinarily flat. We show that these patterns cannot be explained by composition changes. Instead, we present a model in which firms choose between centralized and decentralized organizational forms and demonstrate that it can explain the main patterns. We also show the model has implications that differentiate it from both the exogenous skill-biased technological change model and the endogenous invention model, and that UK data fit with those implications. The result is a consistent picture of the transformation of the UK labour market in the last two decades.
Authors
Richard Blundell
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
David A. Green
David is a Research Fellow of the IFS and a Professor in the Vancouver School of Economics at the University of British Columbia.
Wenchao (Michelle) Jin
Wenchao is an Assistant Professor at the University of Sussex and an IFS Research Associate.
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