Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries

34 Pages Posted: 2 Apr 2004

See all articles by Anders Bjorklund

Anders Bjorklund

Stockholm University; IZA Institute of Labor Economics

Bernt Bratsberg

Kansas State University - Department of Economics; University of Oslo - Ragnar Frisch Centre for Economic Research

Tor Eriksson

Aarhus University - Department of Economics

Markus Jantti

Stockholm University

Oddbjorn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research

Date Written: March 2004

Abstract

This paper examines the role of unobserved ability in explaining inter-industry wage differentials, drawing on data on brothers. Such data allow us to account for unmeasured abilities due to common family and community factors shared by siblings. Important advantages of this approach are that we do not rely on assumptions of exogenous job mobility and that estimates reflect long-run wage differentials rather than short-run differences following switch of industry. The data sets come from four of the Nordic countries and the United States. We find that, in the Nordic countries, only a moderate proportion of the variability in industry wages is due to unobserved ability, while unmeasured factors explain as much as half of the industry wage variation observed in the United States. Accounting for such differences, we show that the U.S. inter-industry wage dispersion is similar to those of the Nordic countries.

Keywords: inter-industry wage differentials, unobserved ability, siblings

JEL Classification: J31, J62

Suggested Citation

Bjorklund, Anders and Bratsberg, Bernt and Eriksson, Tor and Jantti, Markus and Raaum, Oddbjørn, Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries (March 2004). Available at SSRN: https://ssrn.com/abstract=525943

Anders Bjorklund (Contact Author)

Stockholm University ( email )

Swedish Institute for Social Research (SOFI)
S-106 91 Stockholm
Sweden
+46 8 163452 (Phone)
+46 8 154670 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bernt Bratsberg

Kansas State University - Department of Economics ( email )

Manhattan, KS 66502-4001
United States

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0349 Oslo
Norway

Tor Eriksson

Aarhus University - Department of Economics ( email )

Fuglesangs Allé 4
Aarhus, 8210
Denmark
45 87164978 (Phone)

Markus Jantti

Stockholm University ( email )

Swedish Institute for Social Research
Stockholm, SE-10691
Sweden
+468162645 (Phone)

HOME PAGE: http://www.abo.fi/~mjantti/

Oddbjørn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

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