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Skills and the evolution of wage inequality

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  • Capatina, Elena

Abstract

This paper studies wage inequality in the United States between 1980 and 2010 in a framework that accounts for changes in the employment of physical and cognitive skills and their returns. I find that the secular rise in the employment of cognitive skills is largely accounted for by labour force composition changes in shares of gender–education groups rather than changes that occur within these groups. Average employed skills differ greatly across groups, but over time their average employed cognitive skills have remained approximately constant. Returns to cognitive skills increased very sharply for high skill levels, more gradually around mean levels, and decreased at low levels. Returns to physical skills generally declined. These trends account for approximately 63% of the increase in the college wage premium, with changes in returns to cognitive skills playing a dominant role.

Suggested Citation

  • Capatina, Elena, 2014. "Skills and the evolution of wage inequality," Labour Economics, Elsevier, vol. 28(C), pages 41-57.
    • Handle: RePEc:eee:labeco:v:28:y:2014:i:c:p:41-57
    DOI: 10.1016/j.labeco.2014.03.003
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    Cited by:

    1. Wang, Jun & Liao, Chengjuan & Wan, Xuan & Song, Hui, 2021. "Skill Formation, Employment Discrimination, and Wage Inequality: Evidence from the People’s Republic of China," ADBI Working Papers 1283, Asian Development Bank Institute.
    2. Shinya Kajitani & Colin McKenzie & Kei Sakata, 2016. "Use It Too Much and Lose It? The Effect of Working Hours on Cognitive Ability," Melbourne Institute Working Paper Series wp2016n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Valeria Cirillo & Mario Pianta & Leopoldo Nascia, 2015. "The Dynamics of Skills: Technology and Business Cycles," LEM Papers Series 2015/30, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Mamiko Takeuchi, 2021. "Determinants of Earnings and Gender Earnings Gaps among Highly Educated Workers within Major Cities in Asian Countries," Asian Economic Journal, East Asian Economic Association, vol. 35(2), pages 166-186, June.
    5. repec:iae:iaewps:wp2016n7 is not listed on IDEAS
    6. Valeria Cirillo & Mario Pianta & Leopoldo Nascia, 2018. "Technology and Occupations in Business Cycles," Sustainability, MDPI, vol. 10(2), pages 1-25, February.

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    More about this item

    Keywords

    Skilled wage premium; Wage dispersion; Education;
    All these keywords.

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • 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

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