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Does inequality in skills explain inequality of earnings across advanced countries?

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  • Devroye, Dan
  • Freeman, Richard B.

Abstract

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

Suggested Citation

  • Devroye, Dan & Freeman, Richard B., 2002. "Does inequality in skills explain inequality of earnings across advanced countries?," LSE Research Online Documents on Economics 20058, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:20058
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    References listed on IDEAS

    as
    1. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
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    More about this item

    Keywords

    Wage inequality; distribution of skills; skills and education;

    JEL classification:

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

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