Wage Gaps and Development: Lessons From U.S. History

Abstract

This Working Paper should not be reported as representing the views of the IMF.

Reconciling Kuznets and Habbakuk in a unified growth theory

“…Some recent papers have introduced wage gaps based on differences in education requirements across sectors (Doepke 2004;Greenwood and Seshadri 2002). However, as suggested by observations from the nineteenth century United States, there are significant wage gaps across sectors for workers with similar levels of education (see also Mourmouras and Rangazas 2007b). To our knowledge no one has previously attempted to explain wage gaps, for given levels of education, in a two-sector unified growth theory that also includes schooling, fertility, and the structural transformation.…”

“…9 See the quote by Foster in footnote 2. 10 In our earlier working paper, Mourmouras and Rangazas (2007b), we consider differences in schooling across sectors. However, schooling differences across sectors have never been very large in the U.S. Based on the 1915 Iowa census, Goldin and Katz (1999) find the average years of schooling in white collar occupations was 10.8 years, while in blue collar occupations and farming it was 7.8.…”

“…See, for example,Drazen and Eckstein (1988),Hansen and Prescott (2002), andMourmouras and Rangazas (2007b). However, there is no work that we are aware of that also includes a land bequest motive and the transition from incomplete to complete land markets.…”

“…We consider migration costs in our earlier working paperMourmouras and Rangazas (2007b). As the evidence in Sect.…”