A Dynamic Equilibrium Model of the US Wage Structure, 1968-1996

Matthew Johnson and Michael Keane ()

Journal of Labor Economics, 2013, vol. 31, issue 1, 1 - 49

Abstract: We develop an equilibrium model of the US labor market, fit to Panel Study of Income Dynamics data from 1968-96. Our main innovation is a finer differentiation of types of labor than in prior work (i.e., by occupation, education, gender, and age). This lets us fit wage and employment patterns better than simpler models. We obtain a good fit to wages and occupational choices over the 29-year period while also explaining college attendance rates. We use the model to assess factors driving changes in the wage structure. Occupational demand shifts and shifts in demand for college labor and female labor within occupations are key factors.

Date: 2013
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