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Math matters: education choices and wage inequality

Listed author(s):
  • Andrew Rendall
  • Michelle Rendall

SBTC is a powerful mechanism in explaining the increasing gap between educated and uneducated wages. However, SBTC cannot mimic the US within-group wage inequality. This paper provides an explanation for the observed intra-college group inequality by showing that the top decile earners' significant wage growth is underpinned by the link between ex ante ability, math-heavy college majors and highly quantitative occupations. We develop a general equilibrium model with multiple education outcomes, where wages are driven by individuals' ex ante abilities and acquired math skills. A large portion of within-group and general wage inequality is explained by math-biased technical change (MBTC).

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File URL: http://www.econ.uzh.ch/static/wp/econwp160.pdf
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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 160.

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Date of creation: May 2014
Handle: RePEc:zur:econwp:160
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