Decomposing Real Wage Changes in the United States

Ivan Fernandez-Val (), Aico van Vuuren and Francis Vella

No 12044, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We employ CPS data to analyze the sources of hourly real wage changes in the United States for 1976 to 2016 at various quantiles of the wage distribution. We account for the selection bias from the annual hours of work decision by developing and implementing an estimator for nonseparable selection models with censored selection rules. We then decompose wage changes into composition, structural and selection effects. Composition effects have increased wages at all quantiles but the patterns of wage changes are generally determined by the structural effects. Evidence of changes in the selection effects only appear at lower quantiles of the female wage distribution. The combination of these various components produce a substantial increase in wage inequality. This increase has been exacerbated by the changes in females' working hours.

Keywords: wage inequality; wage decomposition; nonseparable model; selection bias (search for similar items in EconPapers)
JEL-codes: C14 I24 J00 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2018-12
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (2)

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