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Income distribution and income dynamics in the United Kingdom

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  • Jayasri Dutta

    (Faculty of Economics and Politics, Sidgwick Avenue, Cambridge CB3 9DD, UK)

  • J. A. Sefton

    (National Institute of Economic and Social Research, 2 Dean Trench Street, London SW1P 3HE, UK)

  • M. R. WEALE

    (National Institute of Economic and Social Research, 2 Dean Trench Street, London SW1P 3HE, UK)

Abstract

In this paper, we propose a model of income dynamics which takes account of mobility both within and between jobs. The model is a hybrid of the mover-stayer model of income dynamics and a geometric random walk. In any period, individuals face a discrete probability of 'moving', in which case their income is a random drawn from a stationary recurrent distribution. Otherwise, they 'stay' and incomes follow a geometric random walk. The model is estimated on income transition data for the United Kingdom from the British Household Panel Survey (BHPS) and provides a good explanation of observed non-linearities in income dynamics. The steady-state distribution of the model provides a good fit for the observed, cross-sectional distribution of earnings. We also evaluate the impact of tertiary education on income transitions and on the long-run distribution of incomes. Copyright © 2001 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 16 (2001)
Issue (Month): 5 ()
Pages: 599-617

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Handle: RePEc:jae:japmet:v:16:y:2001:i:5:p:599-617

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  1. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  2. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  3. Majumder, Amita & Chakravarty, Satya Ranjan, 1990. "Distribution of Personal Income: Development of a New Model and Its Application to U.S. Income Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(2), pages 189-96, April-Jun.
  4. McDonald, James B & Mantrala, Anand, 1995. "The Distribution of Personal Income: Revisited," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 201-04, April-Jun.
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  1. Public schools & charities: a paradox?
    by chris dillow in Stumbling and Mumbling on 2009-07-20 14:15:20
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Cited by:
  1. Tan Kuan Lu, Clifford, 2013. "Do university rankings matter for growth?," MPRA Paper 52705, University Library of Munich, Germany.
  2. Donata Favaro & Eniel Ninka & Margherita Turvani, 2011. "Human capital, technology intensity and growth in a regional context," ERSA conference papers ersa10p687, European Regional Science Association.
  3. Miles, David K & Sefton, James, 2002. "Optimal Social Security Design," CEPR Discussion Papers 3290, C.E.P.R. Discussion Papers.
  4. Popović, Milenko, 2007. "Rising Wage Inequality, Rate of Return on Investment in Education and Cost of Education," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 35-58.
  5. Mok, Penny & Mason, Geoff & Stevens, Philip & Timmins, Jason, 2012. "A Good Worker is Hard to Find: Skills Shortages in New Zealand Firms," Occasional Papers 12/5, Ministry of Economic Development, New Zealand.
  6. Tan Kuan Lu, Clifford, 2014. "University Rankings Game and its relation to GDP per capita and GDP growth," MPRA Paper 53933, University Library of Munich, Germany.
  7. Tan, Clifford, 2013. "The contribution of university rankings to country's GDP per capita," MPRA Paper 53900, University Library of Munich, Germany.
  8. Toivanen, Otto & Väänänen, Lotta, 2011. "Education and Invention," CEPR Discussion Papers 8537, C.E.P.R. Discussion Papers.
  9. Sebastian Barnes & Gregory Thwaites, 2005. "'Real-world' mortgages, consumption volatility and the low inflation environment," Bank of England working papers 273, Bank of England.
  10. Simeonova-Ganeva, Ralitsa, 2006. "Влияние На Човешкия Капитал Върху Икономическия Растеж (България, 1949-2005 Г.)
    [The Impact of Human Capital on the Economic Growth (Bulgari
    ," MPRA Paper 37244, University Library of Munich, Germany.
  11. Nil Demet GUNGOR, 2010. "Education, Human Capital Inequality And Economic Growth: Evidence From Turkey," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 10(2).
  12. Loredana-Ioana Pribac, 2011. "Education – A Factor In The Eu Economic Growth," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 171-176, December.
  13. Milenko Popovic, 2005. "Capital Augmenting and Labor Augmenting Approach in Measuring Contribution of Human Capital and Education to Economic Growth," Development and Comp Systems 0502002, EconWPA.

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