wage dispersion


During the 1980s wage differentials between younger and older
workers and between more and less educated workers expanded
rapidly. Wage dispersion among individuals with the same age
and education also rose. A simple explanation for both sets of
facts is that earnings represent a return to a one-dimensional
index of skill, and that the rate of return to skill rose over
the decade.
We explore a simple method for estimating and testing ‘single
index’ models of wages. Our approach integrates 3 dimensions
of skill: age, education, and unobserved ability. We find that
a one-dimensional skill model gives a relatively successful
account of changes in the structure of wages for white men and
women between 1979 and 1989. We then use the estimated models
for whites to analyze recent changes in the relative wages of
black men and women.

Year of Publication
Date Published
Publication Language
Citation Key
Journal of Econometrics ,October, 1996
Card, D., & Lemieux, T. (1993). Wage Dispersion, Returns to Skill, and Black-White Wage Differentials. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01n583xt98n (Original work published February 1993)
Working Papers