TY - JOUR AU - Hoxby,Caroline M. AU - Terry,Bridget TI - Explaining Rising Income and wage Inequality Among the College Educated JF - National Bureau of Economic Research Working Paper Series VL - No. 6873 PY - 1999 Y2 - January 1999 UR - http://www.nber.org/papers/w6873 L1 - http://www.nber.org/papers/w6873.pdf N1 - Author contact info: Caroline Minter Hoxby Department of Economics Stanford University Landau Building, 579 Serra Mall Stanford, CA 94305 Tel: 650-725-8719 Fax: 650-725-5702 E-Mail: choxby@stanford.edu Bridget T. Long Harvard University Graduate School of Education Gutman Library 465 6 Appian Way Cambridge, MA 02138 Tel: 617/496-4355 Fax: 617/496-3095 E-Mail: longbr@gse.harvard.edu M2 - featured in NBER digest on 1999-06-01 AB - The incomes and wages of college-educated Americans have become significantly more dispersed since 1970. This paper attempts to decompose this growing dispersion into three possible sources of growth. The first source, or extensive margin,' is the increasing demographic diversity of people who attend college. The second is an increasing return to aptitude. The third, or intensive margin,' combines the increasing self-segregation (on the basis of aptitude) of students among colleges and the increasing correlation between the average aptitude of a college's student body and its expenditure on education inputs. These tendencies are the result of changes in the market structure of college education, as documented elsewhere. We find that about 70% of the growth in inequality among recipients of baccalaureate degrees can be explained with observable demographics, measures of aptitude, and college attributes. About 50% of the growth in inequality among people who have 2 years of college education can be similarly explained. Of the growth that can be explained, about 1/4th is associated with the extensive margin, 1/3rd with an increased return to measured aptitude, and 5/12ths with the intensive margin. If the intensive margin is not taken into account, the role of increasing returns to aptitude is greatly overstated. ER -