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Do Male-Female Wage Di fferentials Reflect Diff erences in the Return to Skill? Cross-City Evidence From 1980-2000

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  • Paul Beaudry
  • Ethan Lewis

Abstract

Over the 1980s and 1990s the wage differentials between men and women (with similar observable characteristics) declined significantly. At the same time, the returns to education increased. It has been suggested that these two trends may reflect a common change in the relative price of a skill which is more abundant in both women and more educated workers. In this paper we explore the relevance of this hypothesis by examining the cross-city co-movement in both male-female wage differentials and returns to education over the 1980-2000 period. In parallel to the aggregate pattern, we find that male-female wage differentials at the city levels moved in opposite direction to the changes in the return to education. We also find this relationship to be particularly strong when we isolate data variation which most likely reflects the effect of technological change on relative prices. We take considerable care of controlling for potential selection issues which could bias our interpretation. Overall, our cross-city estimates suggest that most of the aggregate reduction in the male-female wage differential observed over the 1980-2000 period was likely due to a change in the relative price of skill that both females and educated workers have in greater abundance.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18159.

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Date of creation: Jun 2012
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Publication status: published as Paul Beaudry & Ethan Lewis, 2014. "Do Male-Female Wage Differentials Reflect Differences in the Return to Skill? Cross-City Evidence from 1980-2000," American Economic Journal: Applied Economics, American Economic Association, vol. 6(2), pages 178-94, April.
Handle: RePEc:nbr:nberwo:18159

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  1. Paul Beaudry & David A. Green, 2003. "Wages and Employment in the United States and Germany: What Explains the Differences?," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 573-602, June.
  2. Martha J Bailey, 2006. "More Power to the Pill: The Impact of Contraceptive Freedom on Women's Life Cycle Labor Supply," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(1), pages 289-320, 02.
  3. Claudia Goldin & Lawrence F. Katz, 2000. "The Power of the Pill: Oral Contraceptives and Women's Career and Marriage Decisions," NBER Working Papers 7527, National Bureau of Economic Research, Inc.
  4. O'Neill, June & Polachek, Solomon, 1993. "Why the Gender Gap in Wages Narrowed in the 1980s," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 11(1), pages 205-28, January.
  5. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 20(4), pages 733-783, October.
  6. Blau, Francine D & Kahn, Lawrence M, 1997. "Swimming Upstream: Trends in the Gender Wage Differential in 1980s," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(1), pages 1-42, January.
  7. Martha J. Bailey & Brad Hershbein & Amalia R. Miller, 2012. "The Opt-In Revolution? Contraception and the Gender Gap in Wages," NBER Working Papers 17922, National Bureau of Economic Research, Inc.
  8. Katz, Lawrence & Goldin, Claudia, 2002. "The Power of the Pill: Oral Contraceptives and Women’s Career and Marriage Decisions," Scholarly Articles 2624453, Harvard University Department of Economics.
  9. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
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  1. Pay gaps, computers, and the public sector
    by Eric Crampton in Offsetting Behaviour on 2014-04-06 19:00:00
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Cited by:
  1. MORIKAWA Masayuki, 2013. "Postgraduate Education, Labor Participation, and Wages: An empirical analysis using micro data from Japan," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13065, Research Institute of Economy, Trade and Industry (RIETI).
  2. Chang-Tai Hsieh & Erik Hurst & Charles I. Jones & Peter J. Klenow, 2013. "The Allocation of Talent and U.S. Economic Growth," NBER Working Papers 18693, National Bureau of Economic Research, Inc.

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