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Changes in Managerial Pay Structures 1986-1992 and Rising Returns to Skill

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  • O'Shaughnessy, K C
  • Levine, David I
  • Cappelli, Peter

Abstract

We examine the relationship between wages and skill requirements in a sample of over 50,000 managers in 39 companies between 1986 and 1992. The data include an unusually good measure of job requirements and skills that can proxy for human capital. We find that wage inequality increased both within and between firms from 1986 and 1992. Higher returns to our measure of skill accounts for most of the increasing inequality within firms. At the same time, our measure of skill does not explain much of the cross-sectional variance in average wages between employers, and changes in returns to skill do not explain any of the time series increase in between-firm variance over time. Copyright 2001 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 53 (2001)
Issue (Month): 3 (July)
Pages: 482-507

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Handle: RePEc:oup:oxecpp:v:53:y:2001:i:3:p:482-507

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  1. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 653-691, August.
  2. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  3. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  4. Robert S. Smith & Ronald G. Ehrenberg, 1981. "Estimating Wage-Fringe Trade-Offs: Some Data Problems," NBER Working Papers 0827, National Bureau of Economic Research, Inc.
  5. McKinley L. Blackburn & David Neumark, 1991. "Omitted-Ability Bias and the Increase in the Return to Schooling," NBER Working Papers 3693, National Bureau of Economic Research, Inc.
  6. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  7. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
  8. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  9. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
  10. repec:fth:prinin:377 is not listed on IDEAS
  11. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  12. Jacob Mincer, 1991. "Human Capital, Technology, and the Wage Structure: What Do Time Series Show?," NBER Working Papers 3581, National Bureau of Economic Research, Inc.
  13. Erica Groshen & David Levine, 1998. "The rise and decline(?) of U.S. internal labor markets," Research Paper 9819, Federal Reserve Bank of New York.
  14. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  15. Groshen, Erica L, 1991. "Sources of Intra-industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 869-84, August.
  16. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Paid Like Bureaucrats?," Harvard Institute of Economic Research Working Papers 1789, Harvard - Institute of Economic Research.
  17. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  18. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
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