Exploring Income Inequality in the U.S. and the Effects of Selection Bias
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2012
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Haverford College. Department of Economics
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Thesis
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The Holland Hunter 1943 Economics Department Thesis Prize
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eng
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Haverford users only
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Abstract
This paper examines recent evidence that calls into question the importance of Skill-Biased Technological Change for explaining trends in income inequality since the 1970s. More specifically, this paper seeks to verify or disprove the notions that the average return to education only increased in the 1980s and then stagnated, and that further increases in inequality are due mostly to compositional effects. I explore the use of semiparametric econometric techniques to account for selection bias in estimating the average return to education. I use data from the General Social Survey from 1974 to 2010 because it contains a unique combination of questions related to personal background and income. Ultimately, no significant results are found, but, both through the theory that is developed and the econometric techniques discussed, an important bridge is formed between a literature on selection bias and the debate concerning the causes of income inequality.