Between-Group Inequality May Decline Despite a Rising Skill Premium

27 Pages Posted: 14 Sep 2021 Last revised: 19 May 2022


A vast literature aimed at understanding the nature and causes of wage inequality focuses on the skill premium as a key object of interest. In an environment where both the skill premium and the share of skilled workers are changing, however, the between-skill-group component of inequality may fall even as the skill premium rises – a pattern that is indeed observed in the U.S. and in many local labor markets during the 2010s. Understanding the evolution of the skill premium is therefore not always useful in terms of understanding why broad inequality measures are changing.

Keywords: between-group inequality, skill-biased technical change, skill premium

JEL Classification: J31, J21, J24

Suggested Citation

Cortes, Guido Matias and Aziz, Imran, Between-Group Inequality May Decline Despite a Rising Skill Premium. IZA Discussion Paper No. 14701, Available at SSRN:

Guido Matias Cortes (Contact Author)

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Imran Aziz

Yorkville University ( email )

100 Woodside Lane
Fredericton, New Brunswick NB E3C 2R9

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