Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?

35 Pages Posted: 22 Feb 2001 Last revised: 7 Oct 2021

See all articles by Dan Devroye

Dan Devroye

affiliation not provided to SSRN

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Date Written: February 2001

Abstract

The distribution of earnings and the distribution of skills vary widely among advanced countries, with the major English-speaking countries, the US, UK, and Canada, having much greater inequality in both earnings and skills than continental European Union countries. This raises the possibility that cross-country differences in the distribution of skills determine cross-country differences in earnings inequality. Using the International Adult Literacy Survey, we find that skill inequality explains only about 7% of the cross-country difference in inequality. Most striking, the dispersion of earnings in the US is larger in narrowly defined skill groups than is the dispersion of earnings for European workers overall. The bulk of cross-country differences in earnings inequality occur within skill groups, not between them.

Suggested Citation

Devroye, Dan and Freeman, Richard B., Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries? (February 2001). NBER Working Paper No. w8140, Available at SSRN: https://ssrn.com/abstract=261265

Dan Devroye (Contact Author)

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Richard B. Freeman

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