published in: IMF Staff Papers, 2002, 49 (3), 339-362
This paper uses micro data from the New Earnings Survey to document that cross-sectional
wage inequality in the U.K., which rose sharply in the 1980s and continued to rise moderately
through the mid-1990s, has remained essentially unchanged in the latter half of the 1990s.
As in the U.S., changes in within-group inequality are shown to account for a substantial
fraction of the rise in wage dispersion that has occurred over the last 25 years. However,
shifts in the structure of employment – including changes in the occupational and industrial
composition of aggregate employment – are also shown to have had important effects on the
evolution of wage inequality. In addition, there has been a significant convergence of the
wage distributions for men and women; this has had a stabilizing effect on the overall wage
distribution.
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