Earnings inequality and skill mismatch in the U.S.: 1973–2002

This paper shows that skill mismatch is a significant source of inequality in real earnings in the U.S. and that a substantial
fraction of the increase in wage dispersion during the period 1973–2002 was due to the increase in mismatch rates and mismatch
premia. In 2000–2002, surplus and deficit qualifications taken together accounted for 4.3 and 4.6% of the variance of log
earnings, or around 15% of the total explained variance. The dramatic increase in over-education rates and premia accounts
for around 20 and 48% of the increase in the Gini coefficient during the 30 years under analysis for males and females respectively.
The surplus qualification factor is important in understanding why earnings inequality polarized in the last decades.