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Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?

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Author Info
Dan Devroye
Richard B. Freeman

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Abstract

The distribution of earnings and the distribution of skills vary widely among advanced countries, with the major English-speaking countries, the US, UK, and Canada, having much greater inequality in both earnings and skills than continental European Union countries. This raises the possibility that cross-country differences in the distribution of skills determine cross-country differences in earnings inequality. Using the International Adult Literacy Survey, we find that skill inequality explains only about 7% of the cross-country difference in inequality. Most striking, the dispersion of earnings in the US is larger in narrowly defined skill groups than is the dispersion of earnings for European workers overall. The bulk of cross-country differences in earnings inequality occur within skill groups, not between them.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8140.

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Date of creation: Feb 2001
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Handle: RePEc:nbr:nberwo:8140

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J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Edwin Leuven & Hessel Oosterbeek & Hans van Ophem, 2004. "Explaining international differences in male skill wage differentials by differences in demand and supply of skill," Economic Journal, Royal Economic Society, vol. 114(495), pages 466-486, 04. [Downloadable!] (restricted)
  2. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August. [Downloadable!] (restricted)
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  3. Francine D. Blau & Lawrence M. Kahn, 2001. "Do Cognitive Test Scores Explain Higher US Wage Inequality?," NBER Working Papers 8210, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Reuben Gronau & Daniel S. Hamermesh, 2001. "The Demand for Variety: A Household Production Perspective," NBER Working Papers 8509, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. John Schmitt & Jonathan Wadsworth, 2002. "Is the OECD Jobs Strategy Behind US and British Employment and Unemployment Success in the 1990s?," SCEPA Working Papers 2002-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
  3. Michael Burda & Daniel S. Hamermesh & Philippe Weil, 2007. "Total Work, Gender and Social Norms," IZA Discussion Papers 2705, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Fershtman, Chaim & Hvide, Hans K & Weiss, Yoram, 2003. "Cultural Diversity, Status Concerns and the Organization of Work," CEPR Discussion Papers 3982, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Heshmati, Almas, 2004. "Inequalities and Their Measurement," IZA Discussion Papers 1219, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Hipolito , Simon, 2008. "International Differences in Wage Inequality: A New Glance with European Matched Employer-Employee Data," MPRA Paper 7932, University Library of Munich, Germany. [Downloadable!]
  7. The Treasury, 2001. "Human Capital and the Inclusive Economy," Treasury Working Paper Series 01/16, New Zealand Treasury. [Downloadable!]
  8. Elizabeth Cascio & Damon Clark & Nora Gordon, 2008. "Education and the Age Profile of Literacy into Adulthood," NBER Working Papers 14073, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Edin, Per-Anders & Gustavsson, Magnus, 2004. "Time Out of Work and Skill Depreciation," Working Paper Series 2004:14, Uppsala University, Department of Economics. [Downloadable!]
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  10. Andrea Vindigni, 2002. "Uncertainty and the Politics of Employment Protection," Working Papers 844, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  11. Stephen Nickell, 2003. "Poverty and Worklessness in Britain," CEP Discussion Papers dp0579, Centre for Economic Performance, LSE. [Downloadable!]
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  12. Simone Bertoli & Francesco Farina, 2007. "The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 005, Department of Economic Policy, Finance and Development (DEPFID), University of Siena. [Downloadable!]
  13. Timothy M. Smeeding, 2002. "Globalization, Inequality, and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," Center for Policy Research Working Papers 48, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
  14. Blau, Francine & Kahn, Lawrence, 2004. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  15. Sunde, Uwe, 2001. "Human Capital Accumulation, Education and Earnings Inequality," IZA Discussion Papers 310, Institute for the Study of Labor (IZA). [Downloadable!]
  16. Melchor Fernández & Alberto Meixide & Hipólito J. Simón, . "El trabajo de bajos salarios en España," Studies on the Spanish Economy 152, FEDEA. [Downloadable!]
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