Math Matters: Education Choices and Wage Inequality

University of Zurich, Department of Eoconomics, Working Paper No. 160

44 Pages Posted: 6 Jun 2014

See all articles by Andrew Rendall

Andrew Rendall

University of Zurich - Graduate School of Business

Michelle Rendall

University of Zurich - Department of Economics

Date Written: May 31, 2014

Abstract

SBTC is a powerful mechanism in explaining the increasing gap between educated and uneducated wages. However, SBTC cannot mimic the US within-group wage inequality. This paper provides an explanation for the observed intra-college group inequality by showing that the top decile earners' significant wage growth is underpinned by the link between ex ante ability, math-heavy college majors and highly quantitative occupations. We develop a general equilibrium model with multiple education outcomes, where wages are driven by individuals' ex ante abilities and acquired math skills. A large portion of within-group and general wage inequality is explained by math-biased technical change (MBTC).

Keywords: Wage inequality, SBTC, college majors, occupations, mathematics abilities

JEL Classification: E20, E24, E25, I20, I24, J24, J31

Suggested Citation

Rendall, Andrew and Rendall, Michelle, Math Matters: Education Choices and Wage Inequality (May 31, 2014). University of Zurich, Department of Eoconomics, Working Paper No. 160. Available at SSRN: https://ssrn.com/abstract=2446004 or http://dx.doi.org/10.2139/ssrn.2446004

Andrew Rendall (Contact Author)

University of Zurich - Graduate School of Business ( email )

Zürich
Switzerland

Michelle Rendall

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

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