The macroeconomic implications of rising wage inequality in the United States

Jonathan Heathcote, Kjetil Storesletten, Giovanni L. Violante

    Research output: Contribution to journalArticle

    Abstract

    In recent decades, American workers have faced a rising college premium, a narrowing gender gap, and increasing wage volatility. This paper explores the quantitative and welfare implications of these changes. The framework is an incomplete-markets life cycle model in which individuals choose education, intrafamily time allocation, and savings. Given the observed history of the U.S. wage structure, the model replicates key trends in cross-sectional inequality in hours worked, earnings, and consumption. Recent cohorts enjoy welfare gains, on average, as higher relative wages for college graduates and for women translate into higher educational attainment and a more even division of labor within the household.

    Original languageEnglish (US)
    Pages (from-to)681-722
    Number of pages42
    JournalJournal of Political Economy
    Volume118
    Issue number4
    DOIs
    StatePublished - Aug 2010

    ASJC Scopus subject areas

    • Economics and Econometrics

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