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Title: Understanding between and within-group wage inequality through the lens of the 2007 financial crisis
Authors: Yeong, Glenn
Soh, Nicholas
Seet, Qi Hao
Keywords: DRNTU::Humanities::General
Issue Date: 2015
Abstract: In this paper, we first document several stylized facts on the U.S labour market before and after the financial crisis, specifically: (i) The overall wage inequality takes the form of a U-shaped curve; (ii) The wage dispersion amongst low-skill jobs increased during the financial crisis, but decreased after the crisis; (iii) Conversely, the wage dispersion amongst high skilled jobs decreased during the financial crisis but subsequently increased after the crisis; (iv) There is an increasing employment share of high-skill jobs from 2003-2011. These motivate the following questions: Why is there a U-shaped trend before and after the financial crisis? Why does wage dispersion respond asymmetrically to the financial crisis between high and low skill jobs? We then develop a theoretical framework to study the underlying mechanism that can potentially account for those facts. Taken altogether, our model predicts that changes in relative productivity of high-skill and low-skill jobs have shaped between and within-group wage inequality trends between 2003 and 2011. This has also been empirically tested by regressing relative wages/ productivity (A_H/A_L ) against income inequality (90/10 ratio), where the results are found to be statistically significant.
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:HSS Student Reports (FYP/IA/PA/PI)

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