This paper presents a semiparametric procedure to analyze the effects of institutional and labor market factors on recent changes in the U.S. distribution of wages. The effects of these factors are estimated by applying kernel density methods to appropriately 'reweighted' samples. The procedure provides a visually clear representation of where in the density of wages these various factors exert the greatest impact. Using data from the Current Population Survey, we find, as in previous research, that de-unionization and supply and demand shocks were important factors in explaining the rise in wage inequality from 1979 to 1988. We find also compelling visual and quantitative evidence that the decline in the real value of the minimum wage explains a substantial proportion of this increase in wage inequality, particularly for women. We conclude that labor market institutions are as important as supply and demand considerations in explaining changes in the U.S. distribution of wages from 1979 to 1988.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5093.
Length: Date of creation: Apr 1995 Date of revision: Handle: RePEc:nbr:nberwo:5093
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Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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