Industry Wage Differentials: How Many, Big and Significant Are They?

Kevin Reilly and Luisa Zanchi
Additional contact information
Luisa Zanchi: Leeds University Business School

Labor and Demography from University Library of Munich, Germany

Abstract: In this paper we examine three implementation and interpretation issues associated with Krueger and Summers’s (1988) method for calculating interindustry wage differentials. The literature tends to report a less than complete set of industry wage differentials; use the wrong standard errors; and misinterpret the meaning of the industry wage differentials. The solution to the first two issues follows from making explicit the restriction that the employment-weighted average of all industry wage effects is zero, the same restriction that Krueger and Summers are implicitly imposing on industry wage effects. All industries have thus a wage effect relative to an average worker net of any industry effect and correct standard errors are available via the Delta Method. Finally, we propose a method for analysing interindustry wage differentials as actual differences between wage levels expressed in percentage points and not as log points, which is the current misleading standard. Our procedure calculates actual average percentage wage differences by industry and avoids the distortion in differences across industries that log point comparisons engender. An application is provided, using the United States Outgoing Rotation Files of the Current Population Survey for 1989 and 1996 and so updates the work by Krueger and Summers (1988). (JEL: C12 and J31)

Keywords: Industry; Wage; Differentials (search for similar items in EconPapers)
JEL-codes: C12 J31 (search for similar items in EconPapers)
Date: 2002-09-16
Note: Type of Document - pdf; prepared on IBM PC; to print on HP A4;
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0209/0209001.pdf (application/pdf)

Related works:
Journal Article: Industry wage differentials: how many, big and significant are they? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpla:0209001

Access Statistics for this paper

More papers in Labor and Demography from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).