TY  - JOUR
AU  - Faggio,Giulia
AU  - Salvanes,Kjell
AU  - Reenen,John Van
TI  - The Evolution of Inequality in Productivity and Wages: Panel Data Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13351
PY  - 2007
Y2  - August 2007
UR  - http://www.nber.org/papers/w13351
L1  - http://www.nber.org/papers/w13351.pdf
N1  - Author contact info:
Giulia Faggio
London School of Economics
Spatial Economics Research Centre
Houghton Street
London WC2A 2AE
ENGLAND
E-Mail: G.Faggio@lse.ac.uk

Kjell Salvanes
Department of Economics
Norwegian School of Economics & Business
Hellev. 30, N-5035 Bergen, NORWAY
IZA and CEP
E-Mail: kjell.salvanes@nhh.no

John Van Reenen
Department of Economics
London School of Economics
Centre for Economic Performance
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: 00 44 207/955-6976
Fax: 00 44 207/955-6848
E-Mail: j.vanreenen@lse.ac.uk
AB  - There has been a remarkable increase in wage inequality in the US, UK and many other countries over the past three decades. A significant part of this appears to be within observable groups (such as age-gender-skill cells). A generally untested implication of many theories rationalizing the growth of within-group inequality is that firm-level productivity dispersion should also have increased. The relevant data for the US is problematic, so we utilize a UK panel dataset covering the manufacturing and non-manufacturing sectors since the early 1980s. We find evidence that productivity inequality has increased. Existing studies have underestimated this increased dispersion because they use data from the manufacturing sector which has been in rapid decline. Most of the increase in individual wage inequality has occurred because of an increase in inequality between firms (and within industries). Increased productivity dispersion appears to be linked with new technologies as suggested by models such as Caselli (1999) and is not primarily due to an increase in transitory shocks, greater sorting or entry/exit dynamics.
ER  -