| During the past two decades the returns to occupation within educations have increased considerably. At the same time, the returns to education within occupations have been constant. This suggests that the recent rise in the educational premium is primarily due to the fact that high educated individuals are employed in high skill occupations. Since comparable economies differ markedly in terms of their educational distributions apparently similar educational groups have different occupational, hence skill, correspondences in different countries. This paper uses the occupational component of education in each country to construct aggregates of skill that are comparable across them. It embeds those aggregates in a supply and demand framework and quantifies the role of the different alternatives to explain the more rapid growth in wage inequality in the U.S. and Italy from 1983 to 1994 compared to the one in Germany and the U.K. The occupational approach to the data outweighs the traditional approach by education because the implied relative demand changes are more similar among countries. This results in a larger role of supply and employment rate differences for explaining diversity in relative wages. In particular, the more rapid growth in the skill supply in the U.K. explains most of its flat inequality trends while both supply and employment rate differences equally account for the stagnant relative wages in Germany. |
