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Inter-industry Wage Differences and Individual Heterogeneity

By Alan Carruth, William Collier and Andy Dickerson


Two well-established findings are apparent in the analyses of individual wage determination: cross-section wage equations can account for less than half of the variance in earnings and there are large and persistent inter-industry wage differentials. We explore these two empirical regularities using longitudinal data from the BHPS. We show that around 90 % of the variation in earnings can be explained by observed and unobserved individual characteristics. However, small- but statistically significant- industry wage premia do remain, and there is also a role for a rich set of job and workplace controls

Topics: Wage Structure, Wage Differentials, Panel Data, Unobserved Ability
Year: 2011
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