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Changes in the distribution of male and female wages accounting for employment composition using bounds

Authors: Richard Blundell , Amanda Gosling , Hidehiko Ichimura and Costas Meghir
Date: 02 March 2007
Type: Journal Article, Econometrica, Vol. 75, No. 2, pp. 323-363
DOI: 10.1111/j.1468-0262.2006.00750.x

Abstract

This paper examines changes in the distribution of wages using bounds to allow for the impact of nonrandom selection into work. We show that worst case bounds can be informative. However, because employment rates in the United Kingdom are often low, they are not informative about changes in educational or gender wage differentials. Thus we explore ways to tighten these bounds using restrictions motivated from economic theory. With these assumptions, we find convincing evidence of an increase in inequality within education groups, changes in educational differentials, and increases in the relative wages of women.

Figure: Interquartile range of log wages

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Richard Blundell, Amanda Gosling, Hidehiko Ichimura and Costas Meghir September 2004, Changes in the distribution of male and female wages accounting for employment composition using bounds, cemmap Working Paper, W04/25

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