Preference change and increasing wage inequality

This paper argues that preference change could explain, in part, the growth of within-group wage inequality in the USA and the UK in the 1980s. The absence of such preference change in continental European countries might also help explain why their wage inequality did not rise in the same way. The argument relies on evidence from the World Values Surveys and uses an efficiency wage model of within-group wage inequality where there are differences in the degree of discretion at work across firms and workers value not just the wage but also the degree of discretion on the job.