• Table of Contents
    • Abstract
    • Keywords
    • Article
      • 1 Introduction
      • 2 What has happened to the wage distribution?
        • 2.1 Overall trends in US wage inequality
        • 2.2 Comparing the United Kingdom with the United States
        • 2.3 The experience of other countries
      • 3 Explanations of changes in wage inequality
        • 3.1 Sources of skill premia: supply and demand
        • 3.2 The cause of relative demand shifts: technology or trade?
          • 3.2.1 Skill-biased technological change
          • 3.2.2 Increased international trade
        • 3.3 Labour market institutions
          • 3.3.1 Cross-country evidence
          • 3.3.2 Minimum wages
          • 3.3.3 Trade unions and imperfect competition
      • 4 Conclusions
    • See Also
    • Bibliography
    • How to cite this article

wage inequality, changes in

Stephen Machin and John Van Reenen
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

We examine trends in wage inequality in the United States and other countries since the 1960s. We show that there has been a secular increase in the 90–50 wage differential in the United States and the United Kingdom since the late 1970s. By contrast the 50–10 wage differential rose mainly in the 1980s and flattened or fell in the 1990s and 2000s. We conclude that a version of the skill-biased technical change hypothesis combined with institutional changes (the decline in the minimum wage and trade unions) continues to offer the best explanation for the observed patterns of change.
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Keywords

decentralization; elasticity of substitution; Heckscher–Ohlin trade theory; imperfect competition; international trade; labour market institutions; minimum wages; skill-biased technical change; Stolper–Samuelson theorem; technical change; trade unions; unemployment; wage differentials; wage inequality
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Article

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See Also

The Economic and Social Research Council has given financial support for this research through the Centre for Economic Performance. The usual disclaimer applies.
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How to cite this article

Machin, Stephen and John Van Reenen. "wage inequality, changes in." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 19 June 2013 <http://www.dictionaryofeconomics.com/article?id=pde2008_C000551> doi:10.1057/9780230226203.1808

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