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Inter-industry wage inequality: persistent differences and turbulent equalisation

Author

Listed:
  • Patrick Mokre
  • Miriam Rehm

Abstract

The empirical stylised fact of persistent inter-industry wage differentials is an enduring challenge to economic theory. This paper applies the classical theory of ‘real competition’ to the turbulent dynamics of these inter-industrial wage differentials. Theoretically, we argue that competitive wage determination can be decomposed into equalising, dispersing and turbulently equalising factors. Empirically, we show graphically and econometrically for 31 US industries in 1987–2016 that wage differentials, like regulating profit rates, are governed by turbulent equalisation. Furthermore, we apply a fixed-effects OLS as well as a hierarchical Bayesian inference model and find that the link between regulating profit rates and wage differentials is positive, significant and robust.

Suggested Citation

  • Patrick Mokre & Miriam Rehm, 2020. "Inter-industry wage inequality: persistent differences and turbulent equalisation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(4), pages 919-942.
    • Handle: RePEc:oup:cambje:v:44:y:2020:i:4:p:919-942.
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    File URL: http://hdl.handle.net/10.1093/cje/bez064
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    Cited by:

    1. Engelbert Stockhammer & Quirin Dammerer & Andreas Maschke, 2025. "Between Academia and Economic Policy: The Rise and Decline of Post-Keynesian Economics in Austria," Review of Political Economy, Taylor & Francis Journals, vol. 37(4), pages 1331-1357, August.
    2. García-Pozo, Dr. Alejandro & Lasso-Dela-Vega, Elena & González-Guerrero, Dr. Eva, 2024. "Why are workers in the Spanish energy industry more likely to earn higher wages than other Spanish workers?," Structural Change and Economic Dynamics, Elsevier, vol. 71(C), pages 609-616.

    More about this item

    Keywords

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    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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