Decomposing Changes in the Distribution of Real Hourly Wages in the U.S (original) (raw)
Related papers
Selection and the Distribution of Female Hourly Wages in the U.S
Cornell University - arXiv, 2018
We analyze the sources of changes in the distribution of hourly wages in the United States using CPS data for the survey years 1976 to 2016. We account for the selection bias from the employment decision by modeling the distribution of annual hours of work and estimating a nonseparable model of wages which uses a control function to account for selection. This allows the inclusion of all individuals working positive hours and thus provides a fuller description of the wage distribution. We decompose changes in the distribution of wages into composition, structural and selection effects. Composition effects have increased wages at all quantiles but the patterns of change are generally determined by the structural effects. Evidence of changes in the selection effects only appear at the lower quantiles of the female wage distribution. These various components combine to produce a substantial increase in wage inequality.
Decomposing Real Wage Changes in the United States
arXiv: Econometrics, 2018
We employ CPS data to analyze the sources of hourly real wage changes in the United States for 1976 to 2016 at various quantiles of the wage distribution. We account for the selection bias from the annual hours of work decision by developing and implementing an estimator for nonseparable selection models with censored selection rules. We then decompose wage changes into composition, structural and selection effects. Composition effects have increased wages at all quantiles but the patterns of wage changes are generally determined by the structural effects. Evidence of changes in the selection effects only appear at lower quantiles of the female wage distribution. The combination of these various components produce a substantial increase in wage inequality. This increase has been exacerbated by the changes in females' working hours.
Hours Worked and the U.S. Distribution of Real Annual Earnings 1976–2016
arXiv: Econometrics, 2020
We examine the impact of annual hours worked on annual earnings by decomposing changes in the real annual earnings distribution into composition, structural and hours effects. We do so via a nonseparable simultaneous model of hours, wages and earnings. We provide identification results and estimators of the objects required for the decompositions. Using the Current Population Survey for the survey years 1976-2016, we find that changes in the level of annual hours of work are important in explaining movements in inequality in female annual earnings. This captures the substantial changes in their employment behavior over this period. The impact of hours on males' earnings inequality operates only through the lower part of the earnings distribution and reflects the sensitivity of these workers' annual hours of work to cyclical factors.
SSRN Electronic Journal, 2020
I decompose changes in the U.S. household earnings distribution from 1975 to 2018 to examine the labor market processes underlying its evolution over time. I model the distribution of earnings as a function of price effects (wages) and quantity effects (work hours and household employment), each of which are specified separately for men and women, and apply a semi-parametric density estimation technique to infer their contributions to inequality measures over time. Results indicate that changes to the male wage distribution explain much of the growth in earnings inequality, but that its contribution varied greatly over time, with peak contributions in the mid 1990s; while changes in female work hours have actually mitigated inequality growth, particularly by raising earnings in the lower and mid portions of the distribution, with very consistent effects over time. These results demonstrate the relevance of work hours in addition to wage rates in explaining earnings inequality, and the importance of gender differences therein.
2007
This paper examines changes in the distribution of wages using bounds to allow for the impact of nonrandom selection into work. We show that worst case bounds can be informative. However, because employment rates in the United Kingdom are often low, they are not informative about changes in educational or gender wage differentials. Thus we explore ways to tighten these bounds using restrictions motivated from economic theory.
Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach
Econometrica, 1996
This paper presents a semiparametric procedure to analyze the effects of institutional and labor market factors on recent changes in the U.S. distribution of wages. The effects of these factors are estimated by applying kernel density methods to appropriately weighted samples. The procedure provides a visually clear representation of where in the density of wages these various factors exert the greatest impact. Using data from the Current Population Survey, we find, as in previous research, that de-unionization and supply and demand shocks were important factors in explaining the rise in wage inequality from 1979 to 1988. We find also compelling visual and quantitative evidence that the decline in the real value of the minimum wage explains a substantial proportion of this increase in wage inequality, particularly for women. We conclude that labor market institutions are as important as supply and demand considerations in explaining changes in the U.S. distribution of wages from 1979 to 1988.
Trends in U.S. Wage Inequality: Revising the Revisionists
Review of Economics and Statistics, 2008
A large literature documents a substantial rise in U.S. wage inequality and educational wage differentials during the 1980s and early 1990s and concludes that these wage structure changes can be accounted for by shifts in the supply of and demand for skills reinforced by the erosion of labor market institutions supporting low-and middlewage workers. Drawing on an additional decade of data, several "revisionist" studies reject this consensus to conclude that (1) the rise in wage inequality was an "episodic" event of the first-half of the 1980s, (2) this rise was mainly caused by a falling minimum wage, and (3) increased residual wage inequality since the mid-1980s reflects the confounding effects of labor force composition. We reexamine these claims using data from the Current Population Survey for 1963 to 2005 and find only limited support. A slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) and lower-tail (50/10) inequality. Uppertail wage inequality has been increasing steadily since 1980 even after adjusting for labor force composition changes. Lower-tail wage inequality increased sharply in the first-half of the 1980s but has flattened or narrowed since the late 1980s. Strong time series correlations of the real minimum wage and upper-tail wage inequality raise questions concerning the causal interpretation of relationships between the minimum wage and both overall and lower-tail inequality. Changes in the college/high school wage premium are well captured by models emphasizing rapid secular growth in the relative demand for skills driven by skill-biased technical change and fluctuations in the rate of growth of the relative supply of skills. A sharp slowdown in the growth of the relative supply of college workers is the major factor in the rise in the college wage premium since 1980, but standard models also imply a puzzling deceleration in relative demand growth for college workers starting in the early 1990s. An analysis of occupational wage and employment growth indicates a "polarization" of skill demands in the 1990s with employment polarizing into high-wage and low-wage work at the expense of middle-wage jobs. These patterns can be partially reconciled by a modified version of the skill-biased technical change hypothesis based on a more realistic model of how computerization affects task demands.
2004
This Paper examines changes in the distribution of wages using bounds to allow for the impact of non-random selection into work. We show that bounds constructed without any economic or statistical assumptions can be informative. Since employment rates in the UK are often low they are not informative about changes in educational or gender wage differentials. Thus we explore ways to tighten these bounds using restrictions motivated from economic theory.
Determinants of Wage Differentials in the US: A 2-Period Comparison of Age, Gender and Education
In this paper, we study how age, gender and education level affected earnings in the US in 1992 and how it changed in 2004. It is not an uncommon knowledge that a lot of work have been done on how age, gender and educational level affects earnings, however this work is peculiar in the sense that, we test theory and empirical work with randomly selected data. We find that as expected, earnings are positively related to age and educational level and earnings of females in both periods are significantly lower than their male counterparts. In addition, we find that earnings are significantly affected by age, gender and education in both periods under consideration.
The distribution of wages and wage inequality
2018
Over 25 years (1988-2013) the composition of employment and the determinants of wages have changed notably in Portugal. In this essay, the individual records of Quadros de Pessoal/Relatório Único are used to identify the structural and compositional changes in the distribution of wages, in Portugal. The workers’ education level was the variable that most decisively contributed to wage increases over this period. Aggregate compositional effects, influenced by changes in schooling , are seen to be more relevant than the aggregate of the structural effects, which are essentially determined by the secular productivity growth. The horizontal shift of the wage distribution over time did not, however, contaminate the wage inequality indicators, which have remained essentially constant. This indication, is largely due to the fact that worker skills heterogeneity, firm wage policies heterogeneity, and job title heterogeneity have remained surprisingly unchanged. The association between firms...