IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Wage Inequality in a Burdett-Mortensen World

  • Lawrence Uren


    (University of Melbourne, Department of Economics)

  • Gabor Virag


    (University of Rochester)

This paper examines the development of wage inequality in the context of a Burdett- Mortensen (1998) model that is extended to incorporate worker heterogeneity through skill requirements in the production process. In this environment, wage dispersion is a natural consequence of firms pursuing different wage strategies as well as a result of worker and firm production heterogeneity. Changes in the wage distribution are then explained by changes in the productivity of heterogeneous firms. The resulting change in theoretical steady state wage distributions as a result of changes in relative productivity is consistent with many of the observed changes in distribution of wages in the US in recent decades. In particular, an increase in the productivity of less efficient firms may reduce between-group inequality while at the same time increase within-group inequality as observed during the 1970s. On the other hand, an increase in productivity of more efficient firms will tend to increase both between- and within-group inequality as observed during the 1980s and 1990s.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0518.

in new window

Length: 40 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:has:discpr:0518
Contact details of provider: Postal: 1112 Budapest, Budaorsi ut 45.
Phone: (+36-1) 309-2652
Fax: (36-1) 319-3136
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  2. repec:inr:wpaper:155908 is not listed on IDEAS
  3. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  4. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  5. repec:tpr:qjecon:v:112:y:1997:i:1:p:291-303 is not listed on IDEAS
  6. repec:tpr:qjecon:v:109:y:1994:i:2:p:367-97 is not listed on IDEAS
  7. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 467-491.
  8. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  9. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  10. repec:tpr:qjecon:v:118:y:2003:i:4:p:1279-1333 is not listed on IDEAS
  11. repec:tpr:qjecon:v:107:y:1992:i:1:p:285-326 is not listed on IDEAS
  12. John E. DiNardo & Jorn-Steffen Pischke, 1996. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," NBER Working Papers 5606, National Bureau of Economic Research, Inc.
  13. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  14. repec:bla:restud:v:44:y:1977:i:3:p:465-91 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:has:discpr:0518. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.