This paper examines whether the "stretching" (increased variance of wages) of the skill distribution during the 1980s explains the growth in within-group white-black wage gaps. The paper also develops a skill-specific decomposition that measures the stretching's contribution to the wage gap's growth at various skill levels of the distribution. The "local" nature of the skill-specific decomposition breaks the correlation between changes in the position of blacks in the white residual distribution and changes in the variance of wages, thus yielding unbiased estimates of the degree to which the stretching explains changes in the wage gap. The paper shows that if the wage distribution's stretching is an important contributor to the overall wage gap's growth, its greatest impact is at the middle and upper portions of the skill distribution. For wage gaps within education and experience categories, the stretching's contribution is greatest at the tails of the skill distributions.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics