A Fallacy of Wage Differentials: Wage Ratio in Distribution
20 Pages Posted: 18 Aug 2005
Date Written: August 2005
This paper demonstrates a fallacy of the wage differential between educational statuses. A large number of studies have based their approaches upon the wage ratio between educational statuses. However, this wage ratio contains a simple but crucial fallacy. The wage ratio is tricky; it changes even if both the labor market and the school effects remain unchanged. Irrespective of the school effects, the wage ratio first decreases and then increases as the advancement rate increases.
Keywords: Wage ratio, wage distribution, education, human capital
JEL Classification: D31, J24, J31
Suggested Citation: Suggested Citation