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Real Wage Inequality

  • Enrico Moretti

While nominal wage differences between skilled and unskilled workers have increased since 1980, college graduates have experienced larger increases in cost of living because they have increasingly concentrated in cities with high cost of housing. Using a city-specific CPI, I find that real wage differences between college and high school graduates have grown significantly less than nominal differences. Changes in the geographical location of different skill groups are to a significant degree driven by city-specific shifts in relative demand. I conclude that the increase in utility differences between skilled and unskilled workers since 1980 is smaller than previously thought based on nominal wage differences. (JEL J22, J23, J24, J31, R23, R31)

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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 5 (2013)
Issue (Month): 1 (January)
Pages: 65-103

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Handle: RePEc:aea:aejapp:v:5:y:2013:i:1:p:65-103
Note: DOI: 10.1257/app.5.1.65
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  11. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
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