NBER Working Paper No. 26428
Issued in November 2019, Revised in June 2020
This paper was revised on June 11, 2020
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Average wage growth is closely related to aggregate productivity growth across countries and within countries over time. The commonality of patterns across OECD countries suggests that common factors are at work. Are productivity-based explanations of wage changes consistent with increasing variance in wages as well as increases in mean wages as suggested by skill-biased technological change or other factors? To answer this, it is necessary to observe education-specific productivity growth. Cross-industry comparisons reveal that industries dominated by highly educated workers have higher productivity and experienced higher-than-average productivity growth that is more than sufficient to account for increasing skill differentials.