TY - JOUR AU - Broecke, Stijn AU - Quintini, Glenda AU - Vandeweyer, Marieke TI - Wage Inequality and Cognitive Skills: Re-Opening the Debate JF - National Bureau of Economic Research Working Paper Series VL - No. 21965 PY - 2016 Y2 - February 2016 DO - 10.3386/w21965 UR - http://www.nber.org/papers/w21965 L1 - http://www.nber.org/papers/w21965.pdf N1 - Author contact info: Stijn Broecke OECD 2, rue André Pascal 75775 Paris Cedex 16 France E-Mail: stijn.broecke@oecd.org Glenda Quintini OECD 2, rue André Pascal 75775 Paris Cedex 16 France E-Mail: glenda.quintini@oecd.org Marieke Vandeweyer Centre for Economic Studies KU Leuven Naamsestraat 69 3000 Leuven Belgium E-Mail: marieke.vandeweyer@kuleuven.be M1 - published as Stijn Broecke, Glenda Quintini, Marieke Vandeweyer. "Wage Inequality and Cognitive Skills: Reopening the Debate," in Charles R. Hulten and Valerie A. Ramey, editors, "Education, Skills, and Technical Change: Implications for Future US GDP Growth" University of Chicago Press (2019) M3 - presented at "CRIW Conference", October 16-17, 2015 AB - Inequality in the United States is high by international standards, and keeps rising. This is likely to bring significant social as well as economic costs, including lower growth. In this paper, we use the Survey of Adult Skills (PIAAC) to revisit the debate on the relative importance of skills in explaining international differences in wage inequality. While simple decomposition exercises suggest that skills only play a very minor role, demand and supply analysis indicates that the relative net supply of skills could explain 29% of the higher top-end wage inequality in the United States. Our analysis also suggests that skills could explain a substantial portion of the racial wage gap, as well as between individuals from different socio-economic backgrounds. Finally, we find little support for the argument that higher wage inequality in the United States may be compensated for by better relative employment outcomes of the low-skilled. ER -