Abstract
Understanding inequality and devising policies to alleviate it was a central focus of Jan Tinbergen’s lifetime research. He was far ahead of his time in many aspects of his work. This essay places his work in the perspective of research on inequality in his time and now, focusing on his studies on the pricing of skills and the evolution of skill prices. In his most fundamental contribution, Tinbergen developed the modern framework for hedonic models as part of his agenda for integrating demand and supply for skills to study determination of earnings and its distribution and the design of effective policy. His lifetime emphasis on social planning caused some economists to ignore his fundamental work.
Highlights
Jan Tinbergen was—and remains—a towering figure in economics
We focus on the case in which dim ( ) = dim ( ) = dim (z), which was invoked by Tinbergen (1956)
He invented the modern theory of hedonics, which has applications well beyond the labor market
Summary
Jan Tinbergen was—and remains—a towering figure in economics. Educated as a physicist, he applied his training in rigorous empirical science to study the economy. His work went far beyond the approach of his day that assumed earnings were determined as the payments to individual productive components with prices determined by unspecified background market forces (e.g., Staehle 1943; and the formal statement of this approach in Welch 1969) He developed equilibrium models of demand and supply showing how vectors of continuous attributes are priced. Tinbergen (1975) synthesized his ideas up to that date and used his analytical framework to unify two disparate literatures: (a) the demand-oriented educational planning literature (Bowles 1970; Dougherty 1972; Dresch 1975; Fallon and Layard 1975); and (b) the supply-oriented human capital literature (Becker 1964; Mincer 1974).3 Uniting these literatures, he developed and estimated tractable economic models of the market equilibrium pricing of education and other skills and a framework for discussing the roles of technology and supply-side policies in determining the prices of skills with associated nonlinear pricing schedules. I speculate about why his work was neglected by many of his contemporaries
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