Postsecondary Education and Increasing Wage Inequality

Abstract

The paper presents descriptive evidence from quantile regressions and more "structural" estimates from a human capital model with heterogenous returns to show that most of the increase in wage inequality between 1973 and 2005 is due to a dramatic increase in the return to post-secondary education. The model with heterogenous returns also helps explain why both the relative wages and the within-group dispersion among highly-educated workers have increased in tandem over time. These findings add to the growing evidence that, far from being ubiquitous, changes in wage inequality are increasingly concentrated in the very top end of the wage distribution.

Income Inequality and Political Polarization: Time Series Evidence Over Nine Decades

“…This finding is consistent with the view that both income inequality and political polarization are endogenous variables that feedback on each other (Bartels, 2008;McCarty, Poole, and Rosenthal, 2002, 2006, 2009. Perhaps the three most plausible of these are, on the one hand, that increased income inequality (1) weakens the perception of shared destiny and thereby spawns political polarization, (2) through concentrating the gains from lobbying induces more special interest rent-seeking by some of the very wealthy, or (3) fosters a perception that one's political opponents are working against the national interest, which limits support for social-insurance programs that encompass all segments of American society.…”

“…Changes in technology, depicted by the left-most middle-box, have generally reduced the returns to less-skilled labor raising the skill/education premium and contributing to increased inequality (see Atkinson, et al, 2011Goldin and Katz, 2007, and Lemieux, 2006.…”

Unconditional Quantile Regressions

“…But since unions have a much larger impact at the median than at the 90th percentile, this suggests that a decline in unionization would result in a large expansion in the 90-50 gap. This is an important finding since recent studies such as Lemieux (2006a) and Autor et al (2006) show that inequality has expanded much more at the "top-end" than at the "low-end" over the last twenty years.…”

Residual wage inequality in urban China, 1995–2007

“…Farber and Gibbons (1996) reach the same conclusion in a simple learning model. And using a random coefficient model, and in the spirit of Becker (1967) and Mincer (1997), Lemieux (2006a) shows that the variance of wages should be larger for more-than less-educated workers, and that the variance should increase more for more-than less-educated workers when the price of education increases. The evidence from China also suggests heteroskedasiticity (Xing, 2007, Luo, 2008).…”