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Wage Dispersion, Returns to Skill, and Black-White Wage Differentials

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Author Info
David Card
Thomas Lemieux

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Abstract

During the 1980s wage differentials between younger and older workers and between more and less educated workers expanded rapidly. Wage dispersion among individuals with the same age and education also rose. A simple explanation for both sets of facts is that earnings represent a return to a one-dimensional index of skill, and that the rate of return to skill rose over the decade. We explore a simple method for estimating and testing 'single index' models of wages. Our approach integrates 3 dimensions of skill: age, education, and unobserved ability. We find that a one-dimensional skill model gives a relatively successful account of changes in the structure of wages for white men and women between 1979 and 1989. We then use the estimated models for whites to analyze recent changes in the relative wages of black men and women.

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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4365.

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Date of creation: May 1993
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Publication status: published as Journal of Econometrics, vol.74, pp.319-361, October 1996.
Handle: RePEc:nbr:nberwo:4365

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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
J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

References listed on IDEAS
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  1. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February. [Downloadable!] (restricted)
  2. Iain Cockburn & Zvi Griliches, 1987. "Industry Effects and Appropriability Measures in the Stock Markets Valuation of R&D and Patents," NBER Working Papers 2465, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. David Card & Alan B. Krueger, 1991. "School Quality and Black-White Relative Earnings: A Direct Assessment," NBER Working Papers 3713, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Francine D. Blau & Lawrence M. Kahn, 1996. "The Gender Earnings Gap: Some International Evidence," NBER Working Papers 4224, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Smith, James P & Welch, Finis R, 1989. "Black Economic Progress after Myrdal," Journal of Economic Literature, American Economic Association, vol. 27(2), pages 519-64, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Walter Simmons & Rosemarie Emanuele, 2004. "Male and Female Recoveries in Medical Malpractice Cases," Review of Social Economy, Taylor and Francis Journals, vol. 62(1), pages 83-99, March. [Downloadable!] (restricted)
  2. Simon Burgess & Julia Lane & David Stevens, 2001. "Jobs, Workers and Changes in Earnings Dispersion," CEP Discussion Papers 0491, Centre for Economic Performance, LSE. [Downloadable!]
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  3. Mark Rosenzweig & Andrew D. Foster, . "Comparative Advantage, Information and the Allocation of Workers to Tasks: Evidence from an Agricultural Labor Market," Home Pages _066, University of Pennsylvania. [Downloadable!]
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  4. Diane Macunovich, 1999. "The Fortune of One's Birth: Relative Cohort Size and the Youth Labor Market in the United States," Center for Policy Research Working Papers 6, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
  5. David Card & Thomas Lemieux & W. Craig Riddell, 2003. "Unionization and Wage Inequality: A Comparative Study of the U.S, the U.K., and Canada," NBER Working Papers 9473, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Hirsch, Barry T. & Macpherson, David A., 2003. "Wages, Sorting on Skill, and the Racial Composition of Jobs," IZA Discussion Papers 741, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. John E. DiNardo & Jorn-Steffen Pischke, 1996. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," NBER Working Papers 5606, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Kate Antonovics, 2002. "Persistent Racial Wage Inequality," University of California at San Diego, Economics Working Paper Series 2002-05, Department of Economics, UC San Diego. [Downloadable!]
  9. Abowd, John M & Kramarz, Francis & Margolis, David N, 1999. "Minimum Wages and Employment in France and the United States," CEPR Discussion Papers 2159, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Kenneth Chay & David S. Lee, 1996. "Changes in Relative Wages in the 1980s: Returns to Observed and Unobserved Skills and Black-White Wage Differentials," Working Papers 751, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  11. B. T. Hirsch & D. A. Macpherson, . "Wages, racial composition, and quality sorting in labor markets," Institute for Research on Poverty Discussion Papers 1038-94, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  12. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 1997. "Minimum Wages and Youth Employment in France and the United States," NBER Working Papers 6111, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Coen N. Teulings, . "Aggregation Bias in Elasticities of Substitution and the Minimum Wage Paradox," Tinbergen Institute Discussion Papers 98-118/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  14. repec:fth:prinin:339 is not listed on IDEAS
  15. Stephen L. Ross, 2003. "What Is Known about Testing for Discrimination: Lessons Learned by Comparing across Different Markets," Working papers 2003-21, University of Connecticut, Department of Economics, revised Nov 2003. [Downloadable!]
  16. Brian D. Bell, . "Skill-Biased Technical Change and Wages: Evidence from a Longitudinal Data Se," Economics Papers W25., Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  17. M Manacorda & A Manning, 1999. "Just Can't Get Enough:More On Skill-Biassed Change and Labour Market Performance," CEP Discussion Papers 0412, Centre for Economic Performance, LSE. [Downloadable!]
  18. Nathalie Greenan & Jacques Mairesse, 1999. "Using Employee Level Data in a Firm Level Econometric Study," CIRANO Working Papers 99s-12, CIRANO. [Downloadable!]
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  19. Aurora Teixeira, 2003. "Does Inertia Pay Off? Empirical assessment of an evolutionary-ecological model of human capital decisions at firm level," FEP Working Papers 124, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  20. Audra J. Bowlus & Chris Robinson, 2004. "Technological Change in the Production of Human Capital: Implications for Human Capital Stocks, Wages and Skill Differentials," University of Western Ontario, CIBC Human Capital and Productivity Project Working Papers 20041, University of Western Ontario, CIBC Human Capital and Productivity Project. [Downloadable!]
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  21. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers 734, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  22. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE. [Downloadable!]
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  23. Dean Hyslop, 1994. "The Covariance Structure of Intrafamily Earnings, Rising Inequality and Family Labor Supply," Working Papers 718, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  24. David Card, 1998. "Falling Union Membership and Rising Wage Inequality: What's the Connection?," NBER Working Papers 6520, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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