The Macroeconomic Implications of Rising Wage Inequality in the United States

Jonathan Heathcote, Kjetil Storesletten and Giovanni Violante

Journal of Political Economy, 2010, vol. 118, issue 4, 681-722

Abstract: In recent decades, American workers have faced a rising college premium, a narrowing gender gap, and increasing wage volatility. This paper explores the quantitative and welfare implications of these changes. The framework is an incomplete-markets life cycle model in which individuals choose education, intrafamily time allocation, and savings. Given the observed history of the U.S. wage structure, the model replicates key trends in cross-sectional inequality in hours worked, earnings, and consumption. Recent cohorts enjoy welfare gains,on average, as higher relative wages for college graduates and for women translate into higher educational attainment and a more even division of labor within the household. (c) 2010 by The University of Chicago. Allrights reserved.

Date: 2010
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Working Paper: The Macroeconomic Implications of Rising Wage Inequality in the United States (2008)
Working Paper: The Macroeconomic Implications of Rising Wage Inequality in the United States (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:118:y:2010:i:4:p:681-722

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