The Earnings Distribution and Returns to Education in Ireland, 1987-94

The increased supply of skilled labour and institutional factors have been advanced in an effort to explain why some countries have experienced smaller increases in earnings dispersion and in returns to education relative to the United States. Ireland’s supply of skilled labour has increased sharply in recent years and it has had a highly centralized wage bargaining structure; hence, low growth in earnings dispersion would be expected. We compare the distribution of earnings in Ireland in 1987–94 and find a surprisingly large growth in earnings dispersion. In addition, using a decomposition technique we find that much of this is accounted for by increasing returns to education.