Do Cognitive Test Scores Explain Higher Us Wage Inequality?

Blau, Francine D.; Kahn, Lawrence M.

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Do Cognitive Test Scores Explain Higher Us Wage Inequality?

NBER Working Paper No. w8210

49 Pages Posted: 31 Mar 2001 Last revised: 9 Dec 2022

See all articles by Francine D. Blau

Francine D. Blau

Cornell University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics; German Institute for Economic Research (DIW Berlin)

Lawrence M. Kahn

Cornell University - School of Industrial and Labor Relations; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Date Written: April 2001

Abstract

Using microdata from the 1994-6 International Adult Literacy Survey (IALS), we examine the role of cognitive skills in explaining higher wage inequality in the US. We find that while the greater dispersion of cognitive test scores in the US plays a part in explaining higher US wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles for both men and women. And we find that, on average, prices are quantitatively considerably more important than differences in the distribution of test scores in explaining the relatively high level of US wage inequality. This finding holds up when we examine natives only and when we correct for sample selection.

Suggested Citation: Suggested Citation

Blau, Francine D. and Kahn, Lawrence M., Do Cognitive Test Scores Explain Higher Us Wage Inequality? (April 2001). NBER Working Paper No. w8210, Available at SSRN: https://ssrn.com/abstract=265304