IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v102y2012i2p617-42.html
   My bibliography  Save this article

Comparing Real Wage Rates: Presidential Address

Author

Listed:
  • Orley Ashenfelter

Abstract

A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. In this paper I set out the conceptual basis for such measures, provide some historical examples, and then provide my own preliminary analysis of a decade long project designed to measure the wages of workers doing the same job in over 60 countries--workers at McDonald's restaurants. The results demonstrate that the wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000-2007, but with much less progress since the Great Recession. (JEL C81, C82, D24, J31, N30, O57)

Suggested Citation

  • Orley Ashenfelter, 2012. "Comparing Real Wage Rates: Presidential Address," American Economic Review, American Economic Association, vol. 102(2), pages 617-642, April.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:617-42
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.2.617
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    2. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    3. Lutz Hendricks, 2002. "How Important Is Human Capital for Development? Evidence from Immigrant Earnings," American Economic Review, American Economic Association, vol. 92(1), pages 198-219, March.
    4. John C. Ham, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 335-354.
    5. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    6. Rosenzweig, Mark R., 2010. "Global Wage Inequality and the International Flow of Migrants," Working Papers 77, Yale University, Department of Economics.
    7. Robert C. Allen & Jean‐Pascal Bassino & Debin Ma & Christine Moll‐Murata & Jan Luiten Van Zanden, 2011. "Wages, prices, and living standards in China, 1738–1925: in comparison with Europe, Japan, and India," Economic History Review, Economic History Society, vol. 64(s1), pages 8-38, February.
    8. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    9. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    10. Richard B. Freeman & Remco Oostendorp, 2000. "Wages Around the World: Pay Across Occupations and Countries," NBER Working Papers 8058, National Bureau of Economic Research, Inc.
    11. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.
    12. Robert Allen & Robert C. Allen, 2007. "How Prosperous were the Romans? Evidence from Diocletian`s Price Edict (301 AD)," Economics Series Working Papers 363, University of Oxford, Department of Economics.
    13. Ariel Mendez & Robert Tchobanian & Antoine Vion, 2011. "Introduction," Post-Print halshs-00661019, HAL.
    14. repec:pri:rpdevs:presidential%20address%2017january%202010%20all.pdf is not listed on IDEAS
    15. Michael Abbott & Orley Ashenfelter, 1976. "Labour Supply, Commodity Demand and the Allocation of Time," Review of Economic Studies, Oxford University Press, vol. 43(3), pages 389-411.
    16. N. Lesca, 2011. "Introduction," Post-Print halshs-00640604, HAL.
    17. C. Dominguez-Pery, 2011. "Introduction," Post-Print halshs-00740570, HAL.
    18. repec:pri:rpdevs:presidential%20address%2017january%202010%20all is not listed on IDEAS
    19. Albert Rees & Donald P. Jacobs, 1961. "Real Wages in Manufacturing, 1890-1914," NBER Books, National Bureau of Economic Research, Inc, number rees61-1, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael A. Clemens, 2013. "Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas," American Economic Review, American Economic Association, vol. 103(3), pages 198-202, May.
    2. Clemens, Michael & Pritchett, Lant, 2016. "The New Case for Migration Restrictions: An Assessment," Working Paper Series rwp16-054, Harvard University, John F. Kennedy School of Government.
    3. Andrea Ariu & Vincent Vandenberghe, 2014. "Assessing the role of ageing, feminising and better-educated workforces on TFP growth," Working Paper Research 265, National Bank of Belgium.
    4. Bratti, Massimiliano & Fiore, Simona & Mendola, Mariapia, 2016. "Family Size, Sibling Rivalry and Migration: Evidence from Mexico," IZA Discussion Papers 10462, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:617-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.