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Real Wage Inequality

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  • Enrico Moretti

Abstract

While nominal wage differences between skilled and unskilled workers have increased since 1980, college graduates have experienced larger increases in cost of living because they have increasingly concentrated in cities with high cost of housing. Using a city-specific CPI, I find that real wage differences between college and high school graduates have grown significantly less than nominal differences. Changes in the geographical location of different skill groups are to a significant degree driven by city-specific shifts in relative demand. I conclude that the increase in utility differences between skilled and unskilled workers since 1980 is smaller than previously thought based on nominal wage differences. (JEL J22, J23, J24, J31, R23, R31)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 5 (2013)
Issue (Month): 1 (January)
Pages: 65-103

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Handle: RePEc:aea:aejapp:v:5:y:2013:i:1:p:65-103

Note: DOI: 10.1257/app.5.1.65
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References

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Citations

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Cited by:
  1. Thomas Kemeny, 2013. "Immigrant Diversity and Economic Development in Cities: A Critical Review," SERC Discussion Papers 0149, Spatial Economics Research Centre, LSE.
  2. Lindley, Joanne & Machin, Stephen, 2014. "Spatial changes in labour market inequality," Journal of Urban Economics, Elsevier, vol. 79(C), pages 121-138.
  3. Shihe Fu & Stephen Ross, 2010. "Wage Premia in Employment Clusters: How Important is Worker Heterogeneity?," Working Papers 2011-027, Human Capital and Economic Opportunity Working Group.
  4. Veronica Guerrieri & Daniel Hartley & Erik Hurst, 2012. "Within-City Variation in Urban Decline: The Case of Detroit," American Economic Review, American Economic Association, vol. 102(3), pages 120-26, May.
  5. Paul Beaudry & David A. Green & Benjamin M. Sand, 2013. "Spatial Equilibrium with Unemployment and Wage Bargaining: Theory and Estimation," NBER Working Papers 19118, National Bureau of Economic Research, Inc.
  6. Andrea Brandolini & Alfonso Rosolia & Roberto Torrini, 2011. "The distribution of employees’ labour earnings in the European Union: Data, concepts and first results," Working Papers 198, ECINEQ, Society for the Study of Economic Inequality.
  7. repec:wyi:journl:002155 is not listed on IDEAS
  8. Monaco, Kristen & Habermalz, Steffen, 2011. "Wage Inequality of U.S. Truck Drivers," IZA Discussion Papers 5444, Institute for the Study of Labor (IZA).
  9. Robert J. Gordon, 2009. "Misperceptions About the Magnitude and Timing of Changes in American Income Inequality," NBER Working Papers 15351, National Bureau of Economic Research, Inc.
  10. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," NBER Working Papers 14806, National Bureau of Economic Research, Inc.
  11. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269, CPB Netherlands Bureau for Economic Policy Analysis.
  12. Lindley, Joanne & Machin, Stephen, 2013. "Spatial Changes in Labour Market Inequality," IZA Discussion Papers 7600, Institute for the Study of Labor (IZA).
  13. Leonardi, Marco, 2010. "The Effect of Product Demand on Inequality: Evidence from the US and the UK," IZA Discussion Papers 5011, Institute for the Study of Labor (IZA).
  14. Beach, Charles M., 2014. "What Has Happened to Middle-Class Earnings? Distributional Shifts in Earnings in Canada, 1970-2005," CLSSRN working papers clsrn_admin-2014-13, Vancouver School of Economics, revised 26 Mar 2014.
  15. Kok, Suzanne & ter Weel, Bas, 2014. "Cities, Tasks and Skills," IZA Discussion Papers 8053, Institute for the Study of Labor (IZA).
  16. Cinzia, Rienzo, 2010. "Real Wages, Wage Inequality and the Regional Cost-of-living in the UK," MPRA Paper 36390, University Library of Munich, Germany, revised Oct 2010.

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