Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds

Authors

  • Richard Blundell,

    1. Dept. of Economics, University College London, Gower St., London WC1E 6BT, U.K., and Institute for Fiscal Studies, London, U.K.; r.blundell@ucl.ac.uk,
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  • Amanda Gosling,

    1. Dept. of Economics, University of Kent, Canterbury, CT2 7NZ, U.K., and Institute for Fiscal Studies, London, U.K., and Centre for Economic Policy Research, London, U.K.; agosling@essex.ac.uk,
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  • Hidehiko Ichimura,

    1. Graduate School of Public Policy and Graduate School of Economics, University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan; ichimura@e.u-tokyo.ac.jp,
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  • Costas Meghir

    1. Dept. of Economics, University College London, Gower St., London WC1E 6BT, U.K., and Institute for Fiscal Studies, London, U.K., and Centre for Economic Policy Research, London, U.K.; c.meghir@ucl.ac.uk
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    • We would like to thank three anonymous referees, Jaap Abbring, Daron Acemoglou, Manuel Arellano, James Heckman, Joel Horowitz, Chuck Manski, Whitney Newey, and Elie Tamer for useful comments and discussion as well as participants in numerous seminars including the Econometric Society European Meeting in Madrid 2004, the meeting of the European Association of Labour Economists in Lisbon 2004, the Stanford Institute for Theoretical Economics 2002, and seminars at UCL, Johns Hopkins, and Northwestern Universities, the Econometric Study Group in London 2004 as well as participants in the Conference on Inference in Partially Identified Models, Northwestern University, Fall 2005. Funding for this research was provided by the ESRC Centre for the Analysis of Public Policy at the IFS. Data from the FES made available from the CSO through the ESRC data archive has been used by permission of the Controller of HMSO. We are responsible for all errors and interpretations.


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.

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