INTERNATIONAL DIFFERENCES IN MALE WAGE INEQUALITY - INSTITUTIONS VERSUS MARKET FORCES

This paper studies the considerably higher level of wage inequality in the United States than in nine other OECD countries. We find that the greater overall U.S. wage dispersion primarily reflects substantially more compression at the bottom of the wage distribution in the other countries. While differences in the distribution of measured character istics help to explain some aspects of the international differences, higher U.S. prices (i.e., rewards to skills and rents) are an importan t factor. Labor market institutions, chiefly the relatively decentrali zed wage-setting mechanisms iri the United States, provide the most pe rsuasive explanation for these patterns.