Are Within-Groups `Abilities' Distribution Constant on Time?
The analysis of wage inequality has had a lot of tradition since the early nineties, in particular seeking an explanation for residual wage inequality defined as the inequality which is not explained by observables characteristics. However, some assumptions made in order to delve into the causes of wage inequality evolution are far from realistic, as the one assuming constancy in the distribution of non-observed characteristics within each cohort of workers employed (ability distribution). In this work, this latter hypothesis is relaxed. The main contribution is that this paper explicitly considers and values the change in ability distribution and its effects on total wage inequality. The conclusion is that non considering the changes in ability distribution may overvalued the effects of other possibles causes, as for example changes in prices paid to unobserved skills. I use Spanish data to evaluate this new approximation.
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