IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Interindustry Wage Differences and Industry Characteristics

Listed author(s):
  • William T. Dickens
  • Lawrence F. Katz

This paper examines the extent of interindustry wage differences for nonunion workers and finds that even after controlling for a wide range of individual characteristics and geographic location a substantial amount of individual wage variation can be accounted for by industry differences. In the aggregate industry effects explain at least 6.7% of inter-personal wage variation. At most they explain 30%. While the importance of industry differences is clear, the reasons for the differences are more difficult to establish. Independent of the problems of interpreting the correlates of industry differences, even the sign of the relation of many variables with wages is difficult to establish when other variables are included as controls. This conclusion is suggested by a literature review and confirmed by an analysis of a large number of alternative specifications of an industry wage equation using individual wage data from the CPS and industry characteristics from a number of recent sources. Only industry average education and industry profitability have the same (positive) sign in every specification and in all the studies reviewed. Of these two only average education was nearly always significantly related to wages. Average establishment size had a nearly consistent positive relation. What does emerge from the analysis is a pattern of correlations. There appears to be one major dimension (and perhaps other less important dimensions) along which industries differ. A principal components analysis of an industry characteristics data set is used to demonstrate this. High wage industries have lower quit rates, higher labor productivity, fewer women, more educated workers, longer work weeks, a higher ratio of nonwage to wage compensation, higher unionization rates, larger establishments and firms, higher concentration ratios and are more profitable. An analysis of a limited number of industry characteristics in 1939 yields a similar pattern. The implications of these results for alternative theories of wage determination are considered.

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2014.

in new window

Date of creation: Sep 1986
Publication status: published as Dickens, William T. and Lawrence F. Katz. "Inter-Industry Wage Differencesand Industry Charachteristics." Unemployment and the Structure of Labor Markets, edited by K. Lang and J. Leonard, pp. 48-89. New York: Basil Blackwell, 1987.
Handle: RePEc:nbr:nberwo:2014
Note: LS
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
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.:

in new window

  1. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 823-838.
  2. Bergmann, Barbara R, 1971. "The Effect on White Incomes of Discrimination in Employment," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 294-313, March-Apr.
  3. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  4. Pugel, Thomas A, 1980. "Profitability, Concentration and the Interindustry Variation in Wages," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 248-253, May.
  5. Haworth, C T & Rasmussen, David W, 1971. "Human Capital and Inter-Industry Wages in Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 376-380, November.
  6. James E. Long & Albert N. Link, 1983. "The Impact of Market Structure on Wages, Fringe Benefits, and Turnover," ILR Review, Cornell University, ILR School, vol. 36(2), pages 239-250, January.
  7. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  8. Ashenfelter, Orley & Johnson, George E, 1972. "Unionism, Relative Wages, and Labor Quality in U.S. Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 488-508, October.
  9. John Abowd, 1987. "Collective Bargaining and the Division of the Value of the Enterprise," Working Papers 598, Princeton University, Department of Economics, Industrial Relations Section..
  10. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
  11. Michael Podgursky, 1986. "Unions, Establishment Size, and Intra-Industry Threat Effects," ILR Review, Cornell University, ILR School, vol. 39(2), pages 277-284, January.
  12. Wachtel, Howard M & Betsey, Charles, 1972. "Employment at Low Wages," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 121-129, May.
  13. Kay, J A & Mayer, C P, 1986. "On the Application of Accounting Rates of Returns," Economic Journal, Royal Economic Society, vol. 96(381), pages 199-207, March.
  14. Garen, John E, 1985. "Worker Heterogeneity, Job Screening, and Firm Size," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 715-739, August.
  15. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  16. Oster, Gerry, 1979. "A Factor Analytic Test of the Theory of the Dual Economy," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 33-39, February.
  17. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
  18. William T. Dickens & Brian A. Ross, 1984. "Consistent Estimation Using Data From More Than One Sample," NBER Technical Working Papers 0033, National Bureau of Economic Research, Inc.
  19. John M. Abowd, 1987. "Collective Bargaining and the Division of the Value of the Enterprise," NBER Working Papers 2137, National Bureau of Economic Research, Inc.
  20. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
  21. Haworth, Charles T & Reuther, Carol Jean, 1978. "Industrial Concentration and Interindustry Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 85-95, February.
  22. Heywood, John S, 1986. "Labor Quality and the Concentration-Earnings Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 342-346, May.
  23. Farrell E. Bloch & Mark S. Kuskin, 1978. "Unions and Wages: Wage Determination in the Union and Nonunion Sectors," ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
  24. Jenny, Frederic, 1978. "Wage Rates, Concentration and Unionization in French Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 26(4), pages 315-327, June.
  25. repec:sae:ilrrev:v:31:y:1977:i:1:p:45-60 is not listed on IDEAS
  26. William T. Dickens, 1985. "Error Components in Grouped Data: Why It's Never Worth Weighting," NBER Technical Working Papers 0043, National Bureau of Economic Research, Inc.
  27. Freeman, Richard B & Medoff, James L, 1981. "The Impact of the Percentage Organized on Union and Nonunion Wages," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 561-572, November.
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:nbr:nberwo:2014. 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: ()

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.