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Title: Accounting for the Evolution of U.S. Wage Inequality

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: A large literature has documented an increase of U.S. wage inequality over the past several decades. This paper asks how far one can go towards accounting for the evolution of several measures of U.S. wage inequality based on a stochastic human capital model. The model features four school levels with distinct labor types and skill prices and Ben-Porath style human capital accumulation on the job. Two exogenous changes generate rising wage inequality in the model economy: the (non-monetary) cost of attending college and relative skill prices change over time.Preliminary results suggest that human capital theory can account for almost the entire increase of various dispersion statistics, such as the standard deviation of log wages, the 90/50 wage ratio, and the age-specific college wage premium. The model also accounts for the changing returns to experience over time.

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Authors: Hendricks, Lutz

Publisher: Utah State University

Data Collections: IPUMS CPS

Topics: Gender, Labor Force and Occupational Structure, Race and Ethnicity

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