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Fabian Slonimczyk |
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Economics PhD Candidate |
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PAPERS |
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Abstract: This paper shows that skill mismatch is a significant source of inequality in real earnings in the U.S. and that a substantial fraction of the increase in wage dispersion during the period 1973{2002 was due to the increase in mismatch rates and mismatch premia. Standard human capital earnings regressions that do not decompose the education variable into required, surplus, and deficit years provide biased estimates of the relative importance of education in explaining earnings inequality. In 2000{2002 surplus and deficit qualifications taken together accounted for 4:3 and 4:6 percent of the variance in earnings, or around 15 percent of the total explained variance. The dramatic increase in over-education rates and premia accounts for around 11 and 32 percent of the increase in the coefficient of variation of log earnings during the 30 years under analysis for males and females respectively. Residual inequality is slightly diminished when the estimating equation allows the prices of surplus, required and deficit to differ but the well-studied increasing trend of within-group inequality remains otherwise unchanged. Changes in the composition of the labor force are found to be important predictors of increasing residual inequality even when skill mismatch is taken into account. |
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Earnings Inequality and Skill Mismatch in the U.S: 1973-2002 (Job Market Paper) |
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Abstract: This article examines the effect on earnings induced by a mismatch between workers' skills and the skills actually required on the job. It uses the Current Population Survey (CPS) for the period 1983--2002. The special re-interview methodology of the CPS is used to create a large panel, so that individual heterogeneity can be controlled for. Skill requirements are estimated by the median education level for each 3-digit occupation in the 1980 census occupational classification. The analysis, including the determination of skill requirements, is conducted for males and females separately. Cross-sectional analysis confirms the findings in the recent literature. Returns to required schooling are higher than the returns to attained education in standard earnings regressions. Also, for workers with similar educational attainment, over-education reduces earnings and under-education increases them. Contrary to what other studies have found, we conclude that these results are confirmed after controlling for individual fixed effects. |
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Skill Mismatch and Earnings: A Panel analysis of the U.S. Labor Market |
