The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Wage Inequality, Changes In

  • Stephen Machin
  • John Van Reenen
Reference work entry


We examine trends in wage inequality in the United States and other countries since the 1960s. We show that there has been a secular increase in the 90–50 wage differential in the United States and the United Kingdom since the late 1970s. By contrast the 50–10 wage differential rose mainly in the 1980s and flattened or fell in the 1990s and 2000s. We conclude that a version of the skill-biased technical change hypothesis combined with institutional changes (the decline in the minimum wage and trade unions) continues to offer the best explanation for the observed patterns of change.


Decentralization Elasticity of substitution Heckscher–Ohlin trade theory Imperfect competition International trade Labour market institutions Minimum wages Skill-biased technical change Stolper–Samuelson theorem Technical change Trade unions Unemployment Wage differentials Wage inequality 

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The Economic and Social Research Council has given financial support for this research through the Centre for Economic Performance. The usual disclaimer applies.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Stephen Machin
    • 1
  • John Van Reenen
    • 1
  1. 1.