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Wages Around the World: Pay across Occupations and Countries

In: Inequality Around the World


  • Richard B. Freeman

    (Harvard University and National Bureau of Economic Research
    London School of Economics)

  • Remco H. Oostendorp

    (Free University
    Amsterdam Institute for International Development)


Consider the wages of workers in two occupations in two countries: say a labourer and software engineer in India and a labourer and software engineer in Germany. There are three useful contrasts one can make with these wages: 1. The percentage (or absolute) differential between the wages of more skilled and less skilled workers within each country. All else the same, this skill differential reflects the return to human capital and the degree of inequality in the wage structure in the countries. 2. The ratio of the wages of workers in the same occupation between the countries, measured in a common currency through exchange rates. All else the same, this cost differential reflects the different cost of producing goods with these workers. 3. The difference in wages for workers in the same occupation, measured in purchasing power parity (PPP) units. All else the same, these living standard differentials measure differences in the economic well-being of similarly skilled workers.

Suggested Citation

  • Richard B. Freeman & Remco H. Oostendorp, 2002. "Wages Around the World: Pay across Occupations and Countries," International Economic Association Series, in: Richard B. Freeman (ed.), Inequality Around the World, chapter 2, pages 5-37, Palgrave Macmillan.
  • Handle: RePEc:pal:intecp:978-1-137-09971-6_2
    DOI: 10.1007/978-1-137-09971-6_2

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