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Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries

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Author Info
Björklund, Anders () (SOFI, Stockholm University and IZA Bonn)
Bratsberg, Bernt (Ragnar Frisch Centre for Economic Research and Kansas State University)
Eriksson, Tor (Aarhus School of Business)
Jäntti, Markus (Åbo Akademi University)
Raaum, Oddbjörn (Ragnar Frisch Centre for Economic Research)

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Abstract

This paper examines the role of unobserved ability in explaining inter-industry wage differentials, drawing on data on brothers. Such data allow us to account for unmeasured abilities due to common family and community factors shared by siblings. Important advantages of this approach are that we do not rely on assumptions of exogenous job mobility and that estimates reflect long-run wage differentials rather than short-run differences following switch of industry. The data sets come from four of the Nordic countries and the United States. We find that, in the Nordic countries, only a moderate proportion of the variability in industry wages is due to unobserved ability, while unmeasured factors explain as much as half of the industry wage variation observed in the United States. Accounting for such differences, we show that the U.S. inter-industry wage dispersion is similar to those of the Nordic countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1080.

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Length: 34 pages
Date of creation: Mar 2004
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Handle: RePEc:iza:izadps:dp1080

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Related research
Keywords: inter-industry wage differentials; unobserved ability; siblings;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

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References listed on IDEAS
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.:
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  17. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier. [Downloadable!] (restricted)
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  20. Kahn, Lawrence M, 1998. "Collective Bargaining and the Interindustry Wage Structure: International Evidence," Economica, London School of Economics and Political Science, vol. 65(260), pages 507-34, November. [Downloadable!] (restricted)
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  1. Brenda Gannon & Robert Plasman & François Rycx & Ilan Tojerow, 2005. "Inter-Industry Wage Differentials and the Gender Wage Gap: Evidence from European Countries," IZA Discussion Papers 1563, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. François Rycx & Ilan Tojerow & Daphné Valsamis, 2008. "Wage differentials across sectors in Europe: an east-west comparison," Working Papers DULBEA 08-17.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
    Other versions:
  3. Robert Plasman & Tojerow & François Rycx, 2006. "Industry Wage Differentials, Unobserved Ability, and Rent-Sharing: Evidence from Matched Worker-Firm Data, 1995-2002," Working Papers DULBEA 06-14.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
    Other versions:
  4. Björklund, Anders, 2006. "Family Background and Outcomes Later in Life: A (Partial and Personal) Survey of Recent Research Using Swedish Register Data," Working Paper Series 4/2007, Swedish Institute for Social Research. [Downloadable!]
  5. Du Caju, Philip & Rycx, Francois & Tojerow, Ilan, 2008. "Rent-Sharing and the Cyclicality of Wage Differentials," IZA Discussion Papers 3844, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Robert Plasman & François Rycx & Ilan Tojerow, 2007. "Wage Differentials in Belgium: The Role of Worker and Employer Characteristics," Working Papers DULBEA 07-12.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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