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A Dynamic Equilibrium Model of the US Wage Structure, 1968-1996

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  • Matthew Johnson
  • Michael P. Keane

Abstract

We develop an equilibrium model of the US labor market, fit to Panel Study of Income Dynamics data from 1968-96. Our main innovation is a finer differentiation of types of labor than in prior work (i.e., by occupation, education, gender, and age). This lets us fit wage and employment patterns better than simpler models. We obtain a good fit to wages and occupational choices over the 29-year period while also explaining college attendance rates. We use the model to assess factors driving changes in the wage structure. Occupational demand shifts and shifts in demand for college labor and female labor within occupations are key factors.

Suggested Citation

  • Matthew Johnson & Michael P. Keane, 2013. "A Dynamic Equilibrium Model of the US Wage Structure, 1968-1996," Journal of Labor Economics, University of Chicago Press, vol. 31(1), pages 1-49.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/666698
    DOI: 10.1086/666698
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    References listed on IDEAS

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