Does Unmeasured Ability Explain Inter-Industry Wage Differentials

Does Unmeasured Ability Explain Inter- Industry Wage Differences?

This paper provides empirical assessments of the two leading explanations of measured interindustry wage differentials: (1) true wage differentials exist across industries, and (2) the measured differentials simply reflect unmeasured differences in workers' productive abilities. First, we summarize the existing evidence on the unmeasured-ability explanation, which is based on firstdifferenced r...

Inter - Industry Wage Differentials and Job Flows

The paper explores the relationship between job flows and wages in the U.S. manufacturing sector, where wage differentials for seemingly identical workers and job reallocation rates are shown to be negatively correlated across 3-digit industries. High wage industries have the lowest turnover of jobs, offering more secure employment opportunities. In a regression of wage differentials on industr...

Directed Search and Inter-industry Wage Differentials

Directed search models are specified to explain the observed wage dispersion. This class of models generates wage dispersion with homogenous workers across firms. Recent work has extended this theoretical framework to offer a possible resolution of inter-industry wage differentials (IWDs) with multiple skill types. I perform a GMM estimation of an extension of a directed search model (Shimer; 2...

Inter-industry Wage Differentials in Australia, 1947–1954*

Unobserved Worker Quality and Inter-Industry Wage Differentials†

This study quantitatively assesses two alternative explanations for inter-industry wage differentials: worker heterogeneity in the form of unobserved quality and firm heterogeneity in the form of the firm’s willingness to pay (WTP) for workers’productive attributes. We develop an empirical model of labor demand and apply a two-stage nonparametric procedure to recover worker and firm heterogenei...