Lecture 8 Changing Wage Structure PDF

Lecture 8 Changing Wage Structure PDF - Chapter 8: Changing...

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1 Chapter 8: Changing Wage Structure Winter Quarter 2007 Sections: 8.0-8.4
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2 The Wage Distribution 0 5 10 15 Percent 0 300 600 900 1200 1500 1800 2100 2400 2700 3000 Weekly Earnings
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3 What “shapes” the Wage Distribution Wage Differentials exist because of Age differences Younger workers are still investing in skills Ability differences More able workers earn a higher wage Human Capital differences More human capital means higher wages Wage distribution is positively skewed because High ability workers ALSO acquire more human capital Stretches wage distribution out
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4
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5 Statistical Primer: Percentiles Percentiles = the p th percentile of a distribution is the smallest value such that p percent of observations fall at or below it Example: Data: 1,2,3,4,5,6,7,8,9,10 20 th percentile = 70 th percentile = 75 th percentile = 2 7 8
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6 Statistical Primer: Percentiles The 90-10 difference Difference between the 90 th percentile and the 10 th percentile of the wage distribution The 90-50 difference Difference between the 90 th percentile and the 50 th percentile of the wage distribution Top Half of wage distribution The 50-10 differences Difference between the 50 th percentile and the 10 th percentile of the wage distribution Bottom half of wage distribution
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7 Log Wage Differences Assume: 2 wages w 1 and w 2 What does ln(w 2 /w 1 ) = ln(w 2 )-ln(w 1 ) represent? Percentage change in the wage equals Take natural logs of both sides Log Difference approximates the percentage difference between wages w w w w w w w w w Δ + = = = Δ % 1 1 % 1 2 1 2 1 1 2 () w w w w Δ Δ + = % % 1 ln ln 1 2
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8 Overall Wage Structure The next slide shows the changes in log wages by percentile of the wage distribution Period 1963 – 2003 Interpretation: How much did wages change in the p th percentile of the wage distribution
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This note was uploaded on 11/17/2009 for the course ECON 339 taught by Professor Habermalz during the Spring '09 term at Northwestern.

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Lecture 8 Changing Wage Structure PDF - Chapter 8: Changing...

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