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Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality

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  • Robert H. Topel

Abstract

Supply-side factors may contribute to rising wage inequality. First, certain changes in the supply of skills allegedly exacerbate wage inequality. Women's increased labor force participation and increased immigration are the leading candidates; both allegedly reduce the wages of less-skilled men. However, immigration's impact on wage inequality has been minor and the effects of women's participation is inconclusive. Second, in evaluating the likelihood that human capital investment will mitigate future inequality, evidence suggests that rising returns to education have increased the proportion of young people attending college, limiting the growth of inequality among high-wage workers.

Suggested Citation

  • Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
  • Handle: RePEc:aea:jecper:v:11:y:1997:i:2:p:55-74
    Note: DOI: 10.1257/jep.11.2.55
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    References listed on IDEAS

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    1. Per-Anders Edin & Bertil Holmlund, 1995. "The Swedish Wage Structure: The Rise and Fall of Solidarity Wage Policy?," NBER Chapters,in: Differences and Changes in Wage Structures, pages 307-344 National Bureau of Economic Research, Inc.
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    4. Per-Anders Edin & Robert Topel, 1997. "Wage Policy and Restructuring: The Swedish Labor Market since 1960," NBER Chapters,in: The Welfare State in Transition: Reforming the Swedish Model, pages 155-202 National Bureau of Economic Research, Inc.
    5. Robert J. LaLonde & Robert H. Topel, 1991. "Labor Market Adjustments to Increased Immigration," NBER Chapters,in: Immigration, Trade, and the Labor Market, pages 167-199 National Bureau of Economic Research, Inc.
    6. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
    7. Juhn, Chinhui & Kim, Dae Il, 1999. "The Effects of Rising Female Labor Supply on Male Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 23-48, January.
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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