Male Earnings Dispersion Over the Period 1973 to 1995 in Four Industries

Taylor, Karl (1999). Male Earnings Dispersion Over the Period 1973 to 1995 in Four Industries. PhD thesis The Open University.



The following looks at developments in male earnings dispersion in four UK industries over the period 1973 to 1995. Evidence to date in the UK is largely based at the economy-wide level only, or aggregated into manufacturing and non manufacturing sectors. By considering industries other than solely manufacturing it is possible that different trends have occurred in earnings dispersion for each industry. The main objective is to firstly split earnings dispersion over the 23 years into two components: between-group earnings dispersion which occurs as a result of differing worker characteristics across the population; and within-group earnings dispersion, that is any remaining dispersion after controlling for measurable worker characteristics. And secondly, potential factors able to explain within-group earnings dispersion in each industry are tested, namely technological change; globalisation; female participation; immigration and institutional change. The empirical methodology is two step in nature. Initially, micro data based upon the individual is used to purge dispersion of human capital and personal influences. Then, time series techniques are employed to analyse the trend in the measure of within-group dispersion and the potential causal factors.

The results from the first step indicate that whilst within-group earnings dispersion dominates between-group earnings dispersion trends differed across each industry. In line with previous results at the aggregate level, it appears that relative demand shifted in favour of the higher skill endowed. The second stage results indicate that whilst technological shocks are significant in each industry, other factors have a role to play in particular globalisation and supply side influences. A time series analysis of the explainable part of the earnings distribution i.e. between-group earnings dispersion shows that this too was influenced by market forces and institutional change. Furthermore, the returns to education were influenced by technological change and globalisation.

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