The Implications of Demographic-Specific Inflation Rates for Trends in Real Educational Wage Differentials

We use data from consumer expenditure surveys to investigate the impact on trends in real wage differentials of using group-specific price indexes. We find that inflation rates decrease monoton-ically with the education of the household head throughout the 1970s and early 1980s, and real educational wage differentials, calculated using education-specific price indexes, widened somewhat more than nominal differentials. We also find that differences by education level in fuel and energy consumption, whose relative prices increased during the 1970s, account for the majority of the educational index differences.