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Title: Is There Evidence of Skill Biased Technological Change in CPS Residual Inequality?
Citation Type: Miscellaneous
Publication Year: 2010
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Abstract: Skill biased technological change (SBTC) has generally been regarded as an important factor driving the increasing wage inequality in the US over the past three decades. Such an explanation is consistent with the increasing residual wage inequality, the inequality in wages between observably similar workers, in the commonly used March supplement of the Current Population Survey (CPS). A recent nding however, that residual inequality in the Merged Outgoing Rotation Group (MORG) supplement of the CPS has been relatively stable since the mid 1980s, is at odds with a SBTC theory of increasing wage inequality. In this paper I investigate whether the dierence in residual inequality between the March and MORG CPS samples is due to the inclusion of performance-based payments (bonuses, tips, or commissions) in wage measures of the March CPS. Using income information provided by the Medical Expenditure Panel Survey (MEPS) I show that including performance pay in wages leads to an increase in residual inequality that matches the discrepancy in residual inequality between the March and MORG CPS samples. Furthermore, using a matched sample constructed by combining all three samples, I nd that performance pay is positively related to the dierence in wages reported in the March and MORG CPS samples, and accounts for almost one- fth of the variation in this measure.
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Authors: Hoon, Bok Hoong Young
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Data Collections: IPUMS CPS
Topics: Methodology and Data Collection, Other
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