Accounting for income inequality

Economists and other social scientists are trying to understand the inequality of income (either
wages or salaries) of the United States using regression models. The interpretation of these
models includes various variables such as years of education or a false variable for union
membership. But there are also variables that do not go into explaining the function of
earnings. There are three types of such variables: a categorical variable entered as a series of
false explanatory variables, a variable that has a nonlinear (say, quadratic) effect, and two or
more explanatory variables that enter interactively.
The second group in the literature completely abandons the regression framework and
examines inequality between the group and within the group. In this case, the important fact is
that the relative contributions of these different groups (gender, race, age and employment
status) critically depend on the order in which they are introduced into the analysis.
Alternatively, different characteristics can be introduced within the group one by one, but then
the effects are rough and do not control the effect of any other variable. Some authors consider
the extent to which education and race contribute to overall wage inequality and have found
that schooling plays a very large role in explaining wage inequality in some countries, and in
some countries race plays a large role. The rationale for wage inequality was also sought in the
decomposition of variables such as one year, one group, union and non-union workers, then
experience, the industry in which employees work, the region in which they work.
After analyzes and calculations, it was determined that schooling is the variable that has the
greatest impact on income inequality. Occupation was half as important as schooling. Other
variables such as race, experience, industry and region contributed nothing. Finally, gender has
had a significant impact on increasing wage inequality, but it does not contribute to the
explanation.