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Do Cognitive Test Scores Explain Higher US Wage Inequality?

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  • Francine D. Blau
  • Lawrence M. Kahn

Abstract

Using microdata from the 1994-6 International Adult Literacy Survey (IALS), we examine the role of cognitive skills in explaining higher wage inequality in the US. We find that while the greater dispersion of cognitive test scores in the US plays a part in explaining higher US wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles for both men and women. And we find that, on average, prices are quantitatively considerably more important than differences in the distribution of test scores in explaining the relatively high level of US wage inequality. This finding holds up when we examine natives only and when we correct for sample selection.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8210.

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Date of creation: Apr 2001
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Publication status: published as Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, December.
Handle: RePEc:nbr:nberwo:8210

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