Interindustry Wage Differences: An Empirical Review

Abstract

Under competitive labor markets, workers should be paid according to their productivity, regardless ofother personal characteristics. This, however, is not the case and has been widely reported in the literature. This paper reviews empirical evidence and methods of estimation for sectoral wage differentials. Moreover, it showsestimates of such differentials for the United States using CPS data from 1968 to 2008. The presence of industry wage differentials is certain, although under certain econometric techniques, its magnitude is reduced in favor of unobserved worker and firm characteristics.