Modeling Wage Inequality in the U.S. As Conditional Variation: A Time Series Approach
Journal of Income Distribution
Posted: 28 Jul 1998
In this paper, we argue that wage volatility is a good proxy for wage inequality because of the strong and lagged correlation between the two. For seven industry categories, inequality is modeled as a conditional variance process over the period 1964-1988. It is modified to allow for explanatory variables that have a robust theoretical basis for inclusion as determinants of wage inequality. One of the major findings is the identification of the major contributors to rising U.S. wage inequality in the 1980s: the declining real value of the minimum wage, the loss of collective bargaining gains by labor, and immigration.
JEL Classification: C5, D31, J38
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