Dissecting Wage Dispersion

Download Article

At any time, wages differ dramatically across U.S. workers. Some differences in the wages workers earn may be due to differences in characteristics such as age, race, or education level. But wages are substantially dispersed across individuals even after accounting for these differences, suggesting additional factors may play a role.

San Cannon and José Mustre-del-Río investigate the sources of wage dispersion for different demographic groups as well as how these sources have changed over time. They find that “where you work”—also known as the match-specific component of residual wages—accounts for a substantial portion of residual wage differences across individuals. Moreover, they find that the sources of wage dispersion are similar across sexes and education levels.