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Changes in the Structure of Wages: The U.S. versus Japan

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  • Lawrence F. Katz
  • Ana L. Revenga

Abstract

This paper examines changes in wage differentials by educational attainment and experience in the US. and Japan since the early 1970s. While educational earnings differentials have expanded dramatically in the U.S. in the 1980s, the college wage premium has increased only slightly in Japan. In contrast to the large expansion in experience differentials for high school males in the U.S., the wages of male new entrants have risen relative to more experienced workers for both high school and college graduates in Japan from 1979 to 1987. Macroeconomic factors (increased openness, trade deficits, and labor market slack) and changes in institutional structures (the decline in unionization) are likely to have amplified each other in contributing to an unprecedented decline in real and relative earnings of young less-skilled - males in the U.S. in the 1980s. We further find that a sharp deceleration in the rate of growth of college graduates as a fraction of the labor force in the U.S. helps account for the much larger increase in the college wage premium in the U.S. than in Japan in the 1980s.

Suggested Citation

  • Lawrence F. Katz & Ana L. Revenga, 1989. "Changes in the Structure of Wages: The U.S. versus Japan," NBER Working Papers 3021, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3021
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    References listed on IDEAS

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    1. Richard B. Freeman, 1975. "Overinvestment in College Training?," Journal of Human Resources, University of Wisconsin Press, vol. 10(3), pages 287-311.
    2. Richard B. Freeman, 1981. "The Changing Economic Value of Higher Education in Developed Economies: A Report to the O.E.C.D," NBER Working Papers 0820, National Bureau of Economic Research, Inc.
    3. Carl Mosk & Yoshi-Fumi Nakata, 1985. "The Age-Wage Profile and Structural Change in the Japanese Labor Market for Males, 1964-1982," Journal of Human Resources, University of Wisconsin Press, vol. 20(1), pages 100-116.
    4. Freeman, Richard B. & Rebick, Marcus E., 1989. "Crumbling pillar? Declining union density in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 3(4), pages 578-605, December.
    5. John Bound & George E. Johnson, 1989. "Changes in the Structure of Wages During the 1980's: An Evaluation of Alternative Explanations," NBER Working Papers 2983, National Bureau of Economic Research, Inc.
    6. Frank Levy, 1989. "Recent Trends in U.S. Earnings and Family Incomes," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 73-120 National Bureau of Economic Research, Inc.
    7. Freeman, Richard B, 1977. "The Decline in the Economic Rewards to College Education," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 18-29, February.
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    Citations

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    Cited by:

    1. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
    2. Buchinsky, Moshe, 1995. "Quantile regression, Box-Cox transformation model, and the U.S. wage structure, 1963-1987," Journal of Econometrics, Elsevier, vol. 65(1), pages 109-154, January.
    3. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    4. R. D. Plotnick & E. Smolensky & E. Evenhouse & S. Reilly, "undated". "The Twentieth Century Record of Inequality and Poverty in the United States," Institute for Research on Poverty Discussion Papers 1166-98, University of Wisconsin Institute for Research on Poverty.
    5. Snower, Dennis J., 1999. "Inequality of Earnings," CEPR Discussion Papers 2321, C.E.P.R. Discussion Papers.
    6. J. Mullen & Stephen Nord & Martin Williams, 2005. "Regional Skill Structure and the Diffusion of Technology," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(1), pages 115-131, March.
    7. Richard B. Freeman & Karen Needels, 1993. "Skill Differentials in Canada in an Era of Rising Labor Market Inequality," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 45-68 National Bureau of Economic Research, Inc.
    8. Dennis J. Snower, 1998. "Causes of changing earnings inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 69-133.
    9. Roger Bjørnstad, 2000. "The Effect of Skill Mismatch on Wages in a small open Economy with Centralized Wage Setting: The Norwegian Case," Discussion Papers 270, Statistics Norway, Research Department.
    10. Peter Gottschalk & Mary Joyce, 1998. "Cross-National Differences In The Rise In Earnings Inequality: Market And Institutional Factors," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 489-502, November.
    11. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
    12. Guglielmo Caporale & Mohammad Haq, 2002. "Manufacturing Wage Differentials and Employment in Some Scandinavian Countries, the U.S. and the U.K.: An Analysis of Variance Approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 29(4), pages 289-304, December.

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