From creative destruction to human capital growth: Wage dispersion effects in Finland

In Finland the shifts in compensation have been of a similar kind compared to those in the US, but moderate with increasing wage variance between plants, an increasing gap between average non-productive and productive worker wages and an increasing share of non-production workers. In the deep recession and intense restructuring at the beginning of the 1990s the returns on unobserved human capital rose. In the boom period of 1995-1998 the education premium rose. Despite the rise in individual heterogeneity there has been no major increase in wage dispersion. The entire rise in wage dispersion has taken place between plants, while education premium dispersion has risen mainly within plants. At the same time, the distribution of capital and R&D investment across firms has worked in the direction of mitigating wage inequality.