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

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  • Michelle Rendall

    (University of Zurich)

  • Andrew Rendall

    (University of Zurich)

Abstract

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.

Suggested Citation

  • Michelle Rendall & Andrew Rendall, 2013. "Math Matters: Student Ability, College Majors, and Wage Inequality," 2013 Meeting Papers 1196, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1196
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    1. History's winners
      by ? in Stumbling and Mumbling on 2014-06-17 19:58:00

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    Cited by:

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    2. Rendall, Michelle & Parasnis, Jaai & Paterson, Molly, 2022. "Gender, Income, and Numeracy Test Scores," CEPR Discussion Papers 16895, C.E.P.R. Discussion Papers.
    3. Motegi, H. & Nishimura, Y. & Oikawa, M., 2016. "Retirement and Cognitive Decline: Evidence from Global Aging Data," Health, Econometrics and Data Group (HEDG) Working Papers 16/11, HEDG, c/o Department of Economics, University of York.

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    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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