The Race Between Education, Technology, and Institutions

I generalize the canonical model--in which relative supply and demand for worker skills shape the skill premium--incorporating monopsony power, minimum wages, and unemployment. I estimate the extended canonical model using national data and, separately, state-level data. I show that incorporating the minimum wage improves the out-of-sample fit of the traditional canonical model. I document that minimum wages--together with supply and demand--play a central role in shaping the evolution of the U.S. college premium and the differential evolution of state-level college premia. Lending credibility to these conclusions, the state and national estimates are not only qualitatively, but also quantitatively consistent.