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The distribution of wages and wage inequality
Pedro S. Raposo
Over 25 years (1988-2013) the composition of employment and the determinants of wages have changed notably in Portugal. In this essay, the individual records of Quadros de Pessoal/Relatório Único are used to identify the structural and compositional changes in the distribution of wages, in Portugal. The workers’ education level was the variable that most decisively contributed to wage increases over this period. Aggregate compositional effects, influenced by changes in schooling , are seen to be more relevant than the aggregate of the structural effects, which are essentially determined by the secular productivity growth. The horizontal shift of the wage distribution over time did not, however, contaminate the wage inequality indicators, which have remained essentially constant. This indication, is largely due to the fact that worker skills heterogeneity, firm wage policies heterogeneity, and job title heterogeneity have remained surprisingly unchanged. The association between firms with generous wage policies and high-wage workers has weakened significantly over this period, contributing in muted way to lower wage dispersion.