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Does Inequality in Skills Explain Inequality of Earnings Across Advanced Countries?

  • Dan Devroye
  • Richard Freeman

The distribution of earnings and the distribution of skills vary widely among advanced countries, with the major English-speaking countries, the US, UK, and Canada, having much greater inequality in both earnings and skills than continental European Union countries. This raises the possibility that cross-country differences in the distribution of skills determine cross-country differences in earnings inequality. Using the International Adult Literacy Survey, we find that skill inequality explains only about 7% of the cross-country difference in inequality. Most striking, the dispersion of earnings in the US is larger in narrowly defined skill groups than is the dispersion of earnings for European workers overall. The bulk of cross-country differences in earnings inequality occur within skill groups, not between them

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0552.

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Date of creation: Nov 2002
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Handle: RePEc:cep:cepdps:dp0552
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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