The Changing Nature of Wage Inequality
The paper reviews recent developments in the literature on wage inequality, with a particular focus on why inequality growth has been particularly concentrated in the top end of the wage distribution over the last 15 years. Several possible institutional and demand-side explanations are discussed for the secular growth in wage inequality in the United States and other advanced industrialized countries. The paper concludes that three promising explanations for the growth in top-end wage inequality are de-unionization, the increased prevalence of pay for performance, and changes in the relative demand for the types of tasks performed by workers in high-paying occupations.
A preliminary version of this paper was presented at the 20th Annual Conference of the European Society for Population Economics held in Verona in June 2006. I would like to thank Christian Dustmann and seminar participants for their comments, and the Social Sciences and Humanities Research Council of Canada for research support. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.