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Decomposing Real Wage Changes in the United States

Author

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  • Fernández-Val, Iván

    (Boston University)

  • van Vuuren, Aico

    (University of Groningen)

  • Vella, Francis

    (Georgetown University)

Abstract

We employ CPS data to analyze the sources of hourly real wage changes in the United States for 1976 to 2016 at various quantiles of the wage distribution. We account for the selection bias from the annual hours of work decision by developing and implementing an estimator for nonseparable selection models with censored selection rules. We then decompose wage changes into composition, structural and selection effects. Composition effects have increased wages at all quantiles but the patterns of wage changes are generally determined by the structural effects. Evidence of changes in the selection effects only appear at lower quantiles of the female wage distribution. The combination of these various components produce a substantial increase in wage inequality. This increase has been exacerbated by the changes in females' working hours.

Suggested Citation

  • Fernández-Val, Iván & van Vuuren, Aico & Vella, Francis, 2018. "Decomposing Real Wage Changes in the United States," IZA Discussion Papers 12044, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12044
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    References listed on IDEAS

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    Cited by:

    1. Sungwon Lee, 2020. "Nonparametric Identification and Estimation of Panel Quantile Models with Sample Selection," Working Papers 2012, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    2. Tromp, Nikolas, 2019. "The narrowing gender wage gap in South Korea," Journal of the Japanese and International Economies, Elsevier, vol. 53(C), pages 1-1.

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    More about this item

    Keywords

    wage inequality; wage decomposition; nonseparable model; selection bias;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J00 - Labor and Demographic Economics - - General - - - General

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