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Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?

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  • Francine D. Blau

    (Cornell University, NBER, CESifo, and IZA)

  • Lawrence M. Kahn

    (Cornell University, CESifo, and IZA)

Abstract

Using microdata from the 1994-1998 International Adult Literacy Survey for nine countries, we examine the role of cognitive skills in explaining higher wage inequality in the United States. We find that while the greater dispersion of cognitive test scores in the United States plays a part in explaining higher U.S. wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles, and are, on average, quantitatively considerably more important than differences in the distribution of test scores in explaining higher U.S. wage inequality. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
  • Handle: RePEc:tpr:restat:v:87:y:2005:i:1:p:184-193
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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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