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Real Wage Inequality

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  • Enrico Moretti

Abstract

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)

Suggested Citation

  • Enrico Moretti, 2013. "Real Wage Inequality," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 65-103, January.
  • 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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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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