Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach

64 Pages Posted: 26 Jul 2000

See all articles by John E. DiNardo

John E. DiNardo

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER)

Nicole M. Fortin

University of British Columbia (UBC) - Department of Economics

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 1995

Abstract

This paper presents a semiparametric procedure to analyze the effects of institutional and labor market factors on recent changes in the U.S. distribution of wages. The effects of these factors are estimated by applying kernel density methods to appropriately 'reweighted' samples. The procedure provides a visually clear representation of where in the density of wages these various factors exert the greatest impact. Using data from the Current Population Survey, we find, as in previous research, that de-unionization and supply and demand shocks were important factors in explaining the rise in wage inequality from 1979 to 1988. We find also compelling visual and quantitative evidence that the decline in the real value of the minimum wage explains a substantial proportion of this increase in wage inequality, particularly for women. We conclude that labor market institutions are as important as supply and demand considerations in explaining changes in the U.S. distribution of wages from 1979 to 1988.

Suggested Citation

DiNardo, John and Fortin, Nicole M. and Lemieux, Thomas, Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach (April 1995). NBER Working Paper No. w5093. Available at SSRN: https://ssrn.com/abstract=225871

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Nicole M. Fortin

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Thomas Lemieux

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