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Wage and Earnings Inequality Between and Within Occupations: The Role of Labor Supply

Author

Listed:
  • Andrés Erosa
  • Luisa Fuster
  • Gueorgui Kambourov
  • Richard Rogerson

Abstract

We document systematic differences in wage and earnings inequality between and within occupations and show that these differences are intimately related to systematic differences in labor supply across occupations. We then develop a variant of a Roy model in which earnings are a non-linear function of hours, with the extent of this non-linearity differing across occupations. In our theory, the interplay between heterogeneity in tastes for leisure and occupational differences in non-linearities affects the sorting of workers. Moreover, this interplay is crucial to account for the facts on the distributions of hours, wages, and earnings within and across occupations.

Suggested Citation

  • Andrés Erosa & Luisa Fuster & Gueorgui Kambourov & Richard Rogerson, 2023. "Wage and Earnings Inequality Between and Within Occupations: The Role of Labor Supply," NBER Working Papers 31665, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31665
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    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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