Decomposing the Education Wage Gap: Everything but the Kitchen Sink
Julie L. Hotchkiss and Menbere Shiferaw
Working Paper 2010-12
This paper contributes to a large literature concerned with identifying the source of the widening wage gap between high school and college graduates by providing a comprehensive, multidimensional decomposition of wages across both time and educational status. Data from a multitude of sources are brought to bear on the question of the relative importance of labor market supply and demand factors in the determination of those wage differences. The results confirm the importance of investments in and use of technology, which has been the focus of most of the previous literature, but are also able to show that demand and supply factors played very different roles in the growing wage gaps of the 1980s and 1990s.
JEL classification: J200, J310, J240
Key words: education wage gap, skill wage gap, skill-biased technological change, skill-based wage differentials
The authors gratefully acknowledge Mookie Hojiwala and Anne Flatness at the U.S. Bureau of Economic Analysis for assistance with trade data, David Autor and David Dorn for assistance with commuting-zone questions, and Mark Leonard for comments. Andrew Balthrop and Nicole Baerg provided valuable research assistance. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
Please address questions regarding content to Julie Hotchkiss (contact author), Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8198, firstname.lastname@example.org or Menbere Shiferaw, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8875, email@example.com.
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