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Changes in Wage Inequality, 1970-1990

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  • Jacob Mincer

Abstract

Differences in wages between skill groups declined in the 1970's and rose in the 1980's, but aggregate wage inequality grew throughout the period. This divergence remains a puzzle in recent studies of U.S. wage inequality. In this paper the sometimes divergent paths of inter-group and intra-group inequality are explained by the human capital approach. In it, wages are the return on cumulated human capital investments. In turn, interpersonal distributions of investments and of marginal rates of return on them are determined by individual supply and demand curves. Recent studies have shown that relative growth of human capital supply in the 1970's and of demand in the 1980's generated the U-shaped time pattern of ( differentials. Argument and evidence in this paper show that a widening of dispersion among individual demand curves started in the 1970's and generated a continuous expansion of ( group demand curves reflects a growing skill bias in the demand for labor. Aggregate inequality grew throughout the period because within group inequality accounts for the larger part of total inequality. The data also indicate that wage inequality grew in the face of stability in the dispersion of human capital and despite the likely decline in inequality of opportunity, as reflected in the decline in dispersion among supply curves.

Suggested Citation

  • Jacob Mincer, 1996. "Changes in Wage Inequality, 1970-1990," NBER Working Papers 5823, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5823
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    References listed on IDEAS

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    1. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    2. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    3. Jacob Mincer, 1994. "Investment in U.S. Education and Training," NBER Working Papers 4844, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Rulof P Burger & Francis J Teal, 2013. "Measuring the option value of education," Working Papers 15/2013, Stellenbosch University, Department of Economics.
    3. repec:csa:wpaper:2013/13 is not listed on IDEAS
    4. Checchi, Daniele, 2001. "Education, inequality and income inequality," LSE Research Online Documents on Economics 6566, London School of Economics and Political Science, LSE Library.
    5. Axel Franzen, 2001. "Wages and the Use of New Technologies: An Empirical Analysis of the Swiss Labor Market," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 137(IV), pages 505-523, December.

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