ABSTRACT
Following Krueger and Summers (1987, 1988) several studies have demonstrated that, even after carefully controlling for human capital and job characteristics, sizable interindustry wage differentials remain. These differentials seem to be remarkably stable over space and time and there is evidence for a similar pattern of differentials for employees in different occupations (Katz and Summers 1989). Obviously, these results are in conflict with the standard neoclassical theory of wage formation which states that wage differentials for workers with equal skills and comparable job conditions should be equalized by market forces. Krueger and Summers (1988: 280) hence conclude that the empirical evidence presented in their study “shifts the burden of proof to those wishing to interpret wage differentials in terms of simple competitive models.”
