Selection and the distribution of female real hourly wages in the United States

We analyze the role of selection bias in generating the changes in the
observed distribution of female hourly wages in the United States using CPS
data for the years 1975 to 2020. We account for the selection bias from the
employment decision by modelling the distribution of the number of working
hours and estimating a nonseparable model of wages. We decompose changes in
the wage distribution into composition, structural and selection effects.
Composition effects have increased wages at all quantiles while the impact
of the structural effects varies by time period and quantile. Changes in the
role of selection only appear at the lower quantiles of the wage
distribution. The evidence suggests that there is positive selection in the
1970s which diminishes until the later 1990s. This reduces wages at lower
quantiles and increases wage inequality. Post 2000 there appears to be an
increase in positive sorting which reduces the selection effects on wage
inequality.