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The Dynamics of Earnings in Chile

In: Labor Markets and Institutions

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Author Info

  • Cristóbal Huneeus

    (Stanford University)

  • Andrea Repetto

    (Universidad Adolfo Ibañez)

Abstract

This paper provides an empirical analysis of individual earnings using data from the Encuesta Suplementaria de Ingresos. We find that the predictable component of income is hump-shaped over the life-cycle, and that there are strong education effects. The unpredictable component of income can be described by a very persistent permanent shock and a transitory shock. Our estimates are built from a panel of cohorts, so we use US data from the PSID to provide a magnitude for the underestimation of the estimated variances. Surprisingly, we find that the variance of the permanent shock is almost 4 times smaller in Chile than in the US, a result, perhaps, of the relative rigidity of the Chilean labor market.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

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This chapter was published in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Labor Markets and Institutions, , chapter 12, pages 383-410, 2005.

This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v08c12pp383-410.

Handle: RePEc:chb:bcchsb:v08c12pp383-410

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References

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  1. Pischke, Jörn-Steffen, 1991. "Individual income, incomplete information, and aggregate consumption," ZEW Discussion Papers 91-07, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  3. Eduardo Engel & Alexander Galetovic & Claudio Raddatz, 1998. "Taxes and Income Distribution in Chile: Some Unpleasant Redistributive Arithmetic," Documentos de Trabajo 41, Centro de Economía Aplicada, Universidad de Chile.
  4. Susan Dynarski & Jonathan Gruber, 1997. "Can Families Smooth Variable Earnings?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 229-303.
  5. Giuseppe Bertola & Andrea Ichino, 1995. "Wage Inequality and Unemployment: United States versus Europe," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 13-66 National Bureau of Economic Research, Inc.
  6. Dante Contreras & Osvaldo Larrañaga & Julie Litchfield, 2001. "Poverty and Income Distribution in Chile: 1987-1998 New Evidence," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 191-208.
  7. Yael Baytelman & Kevin Cowan & José De Gregorio, 1999. "Política económico-social y bienestar: El caso de Chile," Documentos de Trabajo 56, Centro de Economía Aplicada, Universidad de Chile.
  8. Costas Meghir & Luigi Pistaferri, 2001. "Income variance dynamics and heterogenity," IFS Working Papers W01/07, Institute for Fiscal Studies.
  9. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
  10. Javier Alvarez & Martin Browning & Mette Ejrnæs, 2001. "Modelling Income Processes with lots of heterogeneity," CAM Working Papers 2002-01, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  11. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  12. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  13. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-62, December.
  14. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
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Citations

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Cited by:
  1. Hugo Ñopo & Giorgina Pizzolitto & José Cuesta, 2007. "Using Pseudo-Panels to Measure Income Mobility in Latin America," Research Department Publications 4557, Inter-American Development Bank, Research Department.
  2. Hugo Ñopo & Giorgina Pizzolitto & José Cuesta, 2007. "Usando pseudopaneles para medir la movilidad del ingreso en América," Research Department Publications 4558, Inter-American Development Bank, Research Department.
  3. Sánchez Martín, A. & Jiménez Martín, S. & Robalino, D. & Todeschini, F., 2012. "Labor Income and the Design of Default Portfolios in Mandatory Pension Systems: An Application to Chile," Working Papers 2012-04, FEDEA.

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