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Math matters: education choices and wage inequality

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  • Andrew Rendall
  • Michelle Rendall

Abstract

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).

Suggested Citation

  • Andrew Rendall & Michelle Rendall, 2014. "Math matters: education choices and wage inequality," ECON - Working Papers 160, Department of Economics - University of Zurich.
    • Handle: RePEc:zur:econwp:160
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    File URL: https://www.zora.uzh.ch/id/eprint/96342/1/econwp160.pdf
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    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. Molly Paterson & Jaai Parasnis & Michelle Rendall, 2022. "Gender, Income, and Numeracy Test Scores," Monash Economics Working Papers 2022-02, Monash University, Department of Economics.
    3. Peter Arcidiacono & Esteban M. Aucejo & V. Joseph Hotz, 2016. "University Differences in the Graduation of Minorities in STEM Fields: Evidence from California," American Economic Review, American Economic Association, vol. 106(3), pages 525-562, March.

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    More about this item

    Keywords

    Wage inequality; SBTC; college majors; occupations; mathematics abilities;
    All these keywords.

    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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