ILR Impact Brief - The Sources of International Differences in Wage Inequality

Wage inequality in the U.S. exceeds that of Canada, Denmark, Finland, Italy, Netherlands, Norway, Sweden, and Switzerland. Some researchers have pointed to the higher relative rewards for higher cognitive skill and more education in the U.S. as an important cause of this difference; others emphasize the greater diversity of labor market skills within the American population. This paper uses recently collected international data on cognitive skills, earnings, age, and years of formal schooling to assess the relative importance of population heterogeneity and higher relative pay for more cognitive skill in explaining higher U.S. wage inequality

Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?

Using microdata from the 1994-8 International Adult Literacy Survey (IALS) for nine countries, we examine the role of cognitive skills in explaining higher wage inequality in the United States. We find that while the greater dispersion of cognitive test scores in the United States plays a part in explaining higher U.S. wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles, and are, on average, quantitatively considerably more important than differences in the distribution of test scores in explaining higher U.S. wage inequality.

Long and short arc altitude determination for GEOS-C

The accuracy with which the GEOS-C altitude may be estimated over long (7 day) and short (40 minute) orbital arcs is investigated. Over the long are excellent agreement was attained between a simulation of the orbit determination process and a covariance analysis. Both approaches yielded RMS altitude errors of about 1.5 meters over the Caribbean calibration area and approximately 7.5 meters overall. The geopotential was identified as the largest error source. For the short arc, the covariance analysis revealed that the propagated altitude error is linearly dependent upon station survey component errors which are also the largest source of altitude errors. An Appendix contains the mathematics of covariance analysis as applied to orbit determination

Substitution Between Individual and Cultural Capital: Pre-Migration Labor Supply, Culture and US Labor Market Outcomes Among Immigrant Woman

In this paper we use New Immigrant Survey data to investigate the impact of immigrant women's own labor supply prior to migrating and female labor supply in their source country to provide evidence on the role of human capital and culture in affecting their labor supply and wages in the United States. We find, as expected, that women who migrate from countries with relatively high levels of female labor supply work more in the United States. Moreover, most of this effect remains when we further control for each woman’s own labor supply prior to migrating, which itself also strongly affects labor supply in the United States. Importantly, we find a significantly negative interaction between pre-migration labor supply and source country female labor supply. We obtain broadly similar effects analyzing the determinants of hourly earnings among the employed in the United States, although the results are not always significant. These results suggest an important role for culture and norms in affecting immigrant women's labor supply, since the effect of source country female labor supply on immigrant women's US work hours is still strong even controlling for the immigrant’s own pre-migration labor supply. The negative interaction effects between previous work experience and source country female labor supply on women's US work hours and wages suggest that cultural capital and individual job-related human capital act as substitutes in affecting preparedness for work in the US.gender, immigration, labor supply, human capital

Gender and Youth Employment Outcomes: The US and West Germany, 1984-91

This paper examines gender differences in labor market outcomes for hard-to-employ youth in the US and West Germany during the 1984-91 period. We find that young, less educated American men and especially women are far less likely to be employed than their German counterparts. Moreover, less educated young women and men in the United States have lower earnings relative to more highly educated youth in their own country, and also fare much worse than less educated German youth in absolute terms, correcting for purchasing power. The relatively high employment rates of less educated German youth combined with their relatively high wages raise the question of how they are successfully absorbed into the labor market. We present evidence that the large public sector in Germany in effect functions as an employer of last resort, absorbing some otherwise unemployable low skilled youth. Our findings also suggest that the US welfare system accounts for very little of the US-German difference in employment rates.

International Differences in Male Wage Inequality: Institutions versus Market Forces

While changes in the demand for skilled labor appear to have led to a widening of the wage structures in many countries during the 198Os,considerable differences in the level of wage inequality remain. In this paper, we examine the sources of these differences, focusing primarily on explaining the considerably higher level of wage inequality in the U.S. We find that the greater overall dispersion of the U.S. wage distribution reflects considerably more compression at the bottom of the distribution in the other countries, but relatively little difference in the degree of wage inequality at the top. While differences in the distribution of measured characteristics help to explain some aspects of the international differences, U.S. labor market prices--that is, higher rewards to labor market skills-are an important factor. Labor market institutions, chiefly the relatively decentralized wage-setting mechanisms in the U.S. compared to other countries, appear to provide the most persuasive explanation for these international differences in prices. In contrast, the pattern of cross-country differences in relative supplies of and demands for skills does not appear to be consistent with the pattern of observed differences in wage inequality.

Do Cognitive Test Scores Explain Higher US Wage Inequality?

Using microdata from the 1994-6 International Adult Literacy Survey (IALS), we examine the role of cognitive skills in explaining higher wage inequality in the US. We find that while the greater dispersion of cognitive test scores in the US plays a part in explaining higher US wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles for both men and women. And we find that, on average, prices are quantitatively considerably more important than differences in the distribution of test scores in explaining the relatively high level of US wage inequality. This finding holds up when we examine natives only and when we correct for sample selection.