We evaluate the effect of education policies, welfare programmes,
technology and demographics on the differential evolution of the
skill premium and on the rise in education investment in France and
the US. We use a computable general equilibrium model with
overlapping generations of individuals and endogenous education
decisions. Human capital has two substitutable components -
experience and education - both of which evolve endogenously over
time. We use an original method to calibrate our model properly on
the post-war period and run counterfactual experiments to assess
the relative contributions of the different exogenous variables.
The expansionary French education policy boosted the supply of
skills and kept the skill premium low. In contrast, increasing
education costs in the US contributed to increased wage
differentials by reducing the rise in educational attainment.
Skill-biased technical change is key to understanding rising school
attendance and skill premiums in the US. It has a less important
role and appears to be delayed in France.