Abstract
AbstractDuring the four decades extending from 1950 to 1960, the ratio of the farm to nonfarm wage fluctuated between 0.45 and 0.55. We employ the Oaxaca technique and the Public Use Microdata Sample of the 1990 Census to decompose the farm/nonfarm wage differential. We also use the American Chamber of Commerce Research Association (ACCRA) cost‐of‐living data to measure the impact of the farm/nonfarm cost‐of‐living index on the wage gap. First, we find that the observed wage gap is reduced by half when nominal wages are deflated by the (ACCRA) cost‐of‐living index. Second, by applying the Oaxaca method separately to a subsample of young employees and a subsample of old employees we find that while for the subsample of employees younger than thirty‐five years the real wage gap practically vanishes, the gap for the subsample of employees who are thirty‐five years of age and over is higher than that of the total sample. This finding lends strong support to the hypothesis that between 1950 and 1970 the process of farm out‐migration was positively selective.
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