Unobserved Ability, Efficiency Wages, and Interindustry Wage Differentials

Unobserved Ability, Efficiency Wages, and Interindustry Wage Differentials
Author: McKinley L. Blackburn
Publisher:
Total Pages: 40
Release: 1991
Genre: Ability
ISBN:
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Interindustry wage differentials in wage regressions estimated for individuals have been interpreted as evidence consistent with efficiency wage models. A principal competing explanation is that these differentials are generated by differences across workers in unobserved ability. This paper tests the unobserved ability hypothesis .by incorporating test scores into standard wage regressions as error-ridden indicators of unobserved ability. The results indicate that differences in unobserved ability explain relatively little of interindustry or interoccupation wage differentials.

Interindustry Wage Differentials and Unobserved Ability

Interindustry Wage Differentials and Unobserved Ability
Author: Anders Bjorklund
Publisher:
Total Pages: 0
Release: 2007
Genre:
ISBN:
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We examine the role of unobserved ability in explaining interindustry wage differentials. By using data on brothers, we account for unmeasured abilities shared by siblings. The data came from four Nordic countries and the United States. In the Nordic countries, only a moderate proportion of the variability in industry wages can be attributed to unobserved ability, while unmeasured factors explain as much as half of the U.S. industry-wage variation. Accounting for such differences, we show that the U.S. interindustry wage dispersion is similar with that in the Nordic countries.