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Explaining the Unexplained: Residual Wage Inequality, Manufacturing Decline and Low-skilled Immigration

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  • Eric D Gould

Abstract

This article investigates whether the increasing ‘residual wage inequality’ trend, which is responsible for most of the wage inequality phenomenon, is related to manufacturing decline and the influx of low-skilled immigrants. The analysis exploits variation across locations in the United States, and shows that a shrinking manufacturing sector increases inequality. This effect strengthens with an influx of low-skilled immigrants. Similar results are found for the increasing return to education and the decline in the employment rate. The evidence suggests that manufacturing decline is producing downward pressure on the relative wages of workers at the low end of the income distribution.

Suggested Citation

  • Eric D Gould, 2019. "Explaining the Unexplained: Residual Wage Inequality, Manufacturing Decline and Low-skilled Immigration," The Economic Journal, Royal Economic Society, vol. 129(619), pages 1281-1326.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:619:p:1281-1326.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12611
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    Cited by:

    1. Bekhtiar, Karim, 2025. "The decline of manufacturing employment and the rise of the far-right in Austria," Journal of Public Economics, Elsevier, vol. 242(C).
    2. Andrej Cupák & Pavel Ciaian & d'Artis Kancs, 2021. "Comparing the immigrant-native pay gap: A novel evidence from home and host countries," EERI Research Paper Series EERI RP 2021/05, Economics and Econometrics Research Institute (EERI), Brussels.
    3. Michael Amior, 2025. "The Contribution of Immigration to Local Labor Market Adjustment," Journal of Labor Economics, University of Chicago Press, vol. 43(4), pages 1169-1206.
    4. Gould, Eric, 2023. "The Return to College, Marriage, and Intergenerational Mobility," CEPR Discussion Papers 18566, C.E.P.R. Discussion Papers.
    5. Kimberly Bayard & Tomaz Cajner & Vivi Gregorich & Maria D. Tito, 2022. "Are Manufacturing Jobs Still Good Jobs? An Exploration of the Manufacturing Wage Premium," Finance and Economics Discussion Series 2022-011r1, Board of Governors of the Federal Reserve System (U.S.), revised 24 Sep 2024.
    6. Wenxiao Wang & Christopher Findlay & Shandre Thangavelu, 2021. "Trade, technology, and the labour market: impacts on wage inequality within countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 19-35, May.
    7. Cristiano Antonelli & Gianluca Orsatti & Guido Pialli, 2023. "The knowledge-intensive direction of technological change," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 1-27, March.
    8. Ayfer Ozyilmaz & Yuksel Bayraktar & Esme Isik & Metin Toprak & Mehmet Firat Olgun & Serdar Aydin & Tuncay Guloglu, 2022. "The Impact of Refugees on Income Inequality in Developing Countries by Using Quantile Regression, ANN, Fixed and Random Effect," Sustainability, MDPI, vol. 14(15), pages 1-16, July.
    9. Andreas Beerli & Ronald Indergand & Johannes S. Kunz, 2023. "The supply of foreign talent: how skill-biased technology drives the location choice and skills of new immigrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(2), pages 681-718, April.
    10. Karim Bekhtiar, 2023. "The decline of manufacturing employment and the rise of the far-right in Austria," Economics working papers 2023-09, Department of Economics, Johannes Kepler University Linz, Austria.
    11. Amior, Michael & Stuhler, Jan, 2023. "Immigration, Monopsony and the Distribution of Firm Pay," CEPR Discussion Papers 18709, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

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

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