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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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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.11.2.55
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    References listed on IDEAS

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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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