Math Matters: Education Choices and Wage Inequality

Michelle Rendall and Andrew Rendall
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Andrew Rendall: University of Zurich

No 654, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: Standard SBTC is a powerful mechanism in explaining the increasing wage gap between educated and uneducated individuals. However, SBTC cannot explain within-group wage inequality in the US. This paper provides an explanation for the observed intra-college group inequality by showing that the top decile earners’ significant wage growth is underpinned by the link between ex ante ability, math-heavy college majors and highly quantitative occupations. We develop a general equilibrium model with multiple education outcomes, where wages are driven by individuals’ ex ante abilities and acquired math skills. A large portion of within-group and general wage inequality is explained by math-biased technical change (MBTC).

Date: 2018
New Economics Papers: this item is included in nep-dge
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Working Paper: Math matters: education choices and wage inequality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:654

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