Wage and earnings inequality between and within occupations: The role of labor supply

Andres Erosa, Luisa Fuster, Gueorgui Kambourov and Richard Rogerson

Journal of Monetary Economics, 2024, vol. 145, issue C

Abstract: We document systematic differences in wage and earnings inequality both 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.

Keywords: Labor supply; Occupational choice; Wage inequality; Earnings inequality (search for similar items in EconPapers)
JEL-codes: J22 J24 J31 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Wage and Earnings Inequality Between and Within Occupations: The Role of Labor Supply (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:145:y:2024:i:c:s0304393224000060

DOI: 10.1016/j.jmoneco.2024.01.006

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