Chapter 8

Chapter 8 - Chapter 8: The Wage Structure The Earnings...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 8: The Wage Structure The Earnings Distribution: - two important properties: o there is a lot of wage dispersion o the wage distribution is not symmetrical wit similar-looking tails on both sides of the distribution - positively skewed wage distribution – the bulk of workers earn relatively low wages and that a small number of workers in the upper tail of the distribution receive a disproportionately large share of the rewards o long right tail - wage and the human capital model: o helps us understand many of the key characteristics of the wage distributions that are typically observed in modern labor markets o wage differentials exist not only because some workers accumulate more human capital than others, but because young workers are still accumulating skills compared to older workers are collecting the returns from prior investments o interesting explanation for the positively-skewness in the wage distribution worker invests human capital up to the point where the marginal rate of return to the investment equals the rate of discount o high-ability workers would earn more than low-ability workers even if both groups acquired the same amount of human capital o capability increases productivity and earnings Measuring Inequality: - Lorenz Curve – the cumulative share of income accruing to the various quintiles of households o “perfect-equality” is a straight line with a 45 degree angle o More inequality in an income distribution, the further away the actual Lorenz Curve will be from the 45 degree line - Gini coefficient – area between the perfect-equality Lorenz curve and the actual Lorenz curve to measure inequality o = Area between perfect- equality Lorenz curve and actual Lorenz curve/Area under perfect – equality Lorenz curve o Would be 0 when the actual distribution exhibits perfect equality o Would be 1 when the distribution of income exhibits perfect inequality - 90-10 wage gap – gives the percent wage differential between the worker at the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/06/2008 for the course ECON 380 taught by Professor Gradstudent during the Fall '07 term at UNC.

Page1 / 3

Chapter 8 - Chapter 8: The Wage Structure The Earnings...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online