| 50-10 Wage Gap | measure of inequality between the “middle class” and low-income workers, gives the percent wage differential between workers at the 50th percentile and the worker at the 100th percentile.
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| 90-10 Wage Gap | measure of the range of income distribution, gives the percent wage differential between the worker at the 90th percentile and the worker at the 10th percentile of the income distribution.
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| Gini Coefficient | A numeric measure of earnings inequality. It is the area between the Lorenz curve and the diagonal line of perfect equality, divided by the total area beneath the diagonal.
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| Human Capital Externality | Human capital depends on the quality of the environment to which a child is exposed. Thus, factors such as "role models" and "peer groups." which are somewhat beyond (external to) the control of parents, affect the human capital accumulation process.
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| Intergenerational Correlation | A measure of the relationship between the income of children and the income of their parents. Specifically, the correlation is the slope coefficient from a regression of a measure of the children=s income on a measure of the income of their parents. Most empirical estimates of the intergenerational correlation coefficient are less than one, which indicates that the earnings difference between any two parental households will typically exceed the earnings difference found among the children of these two households.
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| Lorenz Curve | A graphical depiction of the earnings distribution. It indicates the cumulative percentage of all wage and salary earners (ranked from lowest to highest earnings) on the horizontal axis; the vertical axis measures the corresponding cumulative percentage of earnings accruing to that group.
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| Positively-Skewed Wage Distribution | The wage distribution which has a long right tail. It implies that the bulk of workers earn relatively low wages and that a small number of workers in the upper tail of the distribution receive a disproportionately large share of the wealth.
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| Regression to the Mean | The tendency for income differences across families to get smaller and smaller over time as the various families move towards the mean income in the population. An empirical manifestation of the regression to the mean is found in estimates of the intergenerational correlation coefficient, which is less than one. This suggests that the children of wealthy parents are more likely to have income levels that are closer to the income level of the population as a whole (i.e., income level of families regress towards the mean over time).
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| Skill-Biased Technical Change | The fact that the demand for skilled workers has increased by more than the demand for unskilled workers. This change occurred during the 1980's because of technological advances that provide Ahigh-tech@ substitutes for unskilled workers (e.g., robots in car production) and Ahigh-tech@ complements for highly-educated workers (e.g., lasers for eye surgery).
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| Social Capital | The set of variables that characterizes the quality of the environment where a person grows up or lives. Social capital includes factors such as the role models and peer groups to which the child is exposed.
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| Social Mobility | The link between the skills of parents and children. More broadly it is the transmission process from one generation to the next of social position, norms, and wealth.
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| The Superstar Phenomenon | The fact that a few talented persons in some professions earn astronomically high salaries while other, slightly less talented, persons earn very little. It arises in occupations which allow extraordinarily talented persons to reach very large markets at a very low price.
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