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Math Matters: Student Ability, College Majors, and Wage Inequality

Listed author(s):
  • Michelle Rendall

    (University of Zurich)

  • Andrew Rendall

    (University of Zurich)

This paper assess increasing wage inequality by showing that the top deciles of college earners are enjoying significant relative wage growth, which is underpinned by the link between ex ante math ability, math-heavy college majors and highly quantitative occupations. This mechanism is further strengthened by the strong and accelerating shift away from math-heavy college majors and occupations. We develop a general equilibrium model with multiple education choices whose outcomes depends on ex ante abilities, coupled with preferences, that lead to occupational opportunities that mimic the facts presented. This research shows that a large portion of wage inequality is determined by initial math/quantitative abilities. Furthermore, these results imply that policy measures aimed at increasing college enrollment to decrease wage inequality do not address the underlying process and, in some cases, may exacerbate wage inequality.

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File URL: https://economicdynamics.org/meetpapers/2013/paper_1196.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 1196.

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Date of creation: 2013
Handle: RePEc:red:sed013:1196
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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