Two Sides of the Same Coin: U.S. â€œResidualâ€ Inequality and the Gender Gap
AbstractIn this paper we show that the two major developments experienced by the US labor market - rising inequality and narrowing of the male-female wage gap - can be explained by a common source: the increase in price of cognitive skills and the decrease in price of motor skills. We obtain the price of a multidimensional vector of skills by combining a hedonic price framework with data on the skill requirements of jobs from the Dictionary of Occupational Titles (DOT) and workersâ€™ wages from the CPS. We find that in the 1968-1990 period the returns to cognitive skills increased 4-fold and the returns to motor skills declined by 30%. Given that the top of the wage distribution of college and high school graduates is relatively well endowed with cognitive skills, these changes in skill prices explain up to 40% of the rise in inequality among college graduates and about 20% among high school graduates. In a similar way, because women were in occupations intensive in cognitive skills while men were in motor-intensive occupations, these skill price changes explain over 80% of the observed narrowing of the male-female wage gap.
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Bibliographic InfoPaper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050617.
Length: 60 pages
Date of creation: Jan 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-03 (All new papers)
- NEP-HRM-2006-09-03 (Human Capital & Human Resource Management)
- NEP-LAB-2006-09-03 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
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