Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?
American Economic Review
vol. 96,
no. 3, June 2006
(pp. 461-498)
Abstract
This paper shows that a large fraction of the 1973-2003 growth in residual wage inequality is due to composition effects linked to the secular increase in experience and education, two factors associated with higher within-group wage dispersion. The level and growth in residual wage inequality are also overstated in the March Current Population Survey (CPS) because, unlike the May or Outgoing Rotation Group (ORG) CPS, it does not measure directly the hourly wages of workers paid by the hour. The magnitude and timing of the growth in residual wage inequality provide little evidence of a pervasive increase in the demand for skill due to skill-biased technological change. (JEL J31)Citation
Lemieux, Thomas. 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?" American Economic Review, 96 (3): 461-498. DOI: 10.1257/aer.96.3.461Additional Materials
JEL Classification
- I21 Analysis of Education
- J23 Labor Demand
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials