Macroeconomic Conditions and Wage Inequality: Expanding and Analyzing the Worldwide Dataset

Abstract

This paper introduces a comprehensive dataset examining wage inequality and returns to education across 40 countries, revisiting earlier studies on the effects of economic development, trade openness, and returns to skill on wage inequality. Our findings include: (i) the presence of Kuznets' "inverted U-curve" in wage inequality data, (ii) a positive relationship between trade openness and both wage inequality and returns to education, (iii) a positive relationship between levels of wage inequality and levels of return to education, and (iv) an intriguing phenomenon where accelerated skill-biased technological change leads to a deceleration of the wage gap widening process, as evidenced by the negative relationship between changes in wage inequality and changes in returns to education.

Keywords: wage inequality, Kuznets curve, trade openness, skill-biased technological change

JEL Classification: F66, I24, I26, J31, O33