Advanced Search
MyIDEAS: Login to save this book chapter or follow this series

Theories of the distribution of earnings

In: Handbook of Income Distribution

Contents:

Author Info

  • Neal, Derek
  • Rosen, Sherwin

Abstract

Several empirical regularities motivate most theories of the distribution of labor earnings. Earnings distributions tend to be skewed to the right and display long right tails. Mean earnings always exceed median earnings and the top percentiles of earners account for quite a disproportionate share of total earnings. Mean earnings also differ greatly across groups defined by occupation, education, experience, and other observed traits. With respect to the evolution of the distribution of earnings for a given cohort, initial earnings dispersion is smaller than the dispersion observed in prime working years.We explore several models that address these stylized facts. Stochastic theories examine links between assumptions about the distribution of endowments and implied features of earnings distributions given assumptions about the processes that translate endowments into earnings. Selection models describe how workers choose a career. Because workers select their best option from a menu of possible careers, their allocation decisions tend to generate skewed earnings distributions. Sorting models illustrate this process in an environment where workers learn about their endowments and therefore adjust their allocation decisions over time.Human capital theory demonstrates that earnings dispersion is a prerequisite for significant skill investments. Without earnings dispersion, workers would not willingly make the investments necessary for high-skill jobs. Human capital models illustrate how endowments of wealth and talent influence the investment decisions that generate observed distributions of earnings.Agency models illustrate how wage structures may determine rather than reflect worker productivity. Tournament theory addresses the long right tails of wage distributions within firms. Efficiency wage models address differences in wages across employments that involve different monitoring technologies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B7RKR-4FF32Y6-B/2/d2de6a6c277a6a3ab785f032454fe8c4
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

as in new window

This chapter was published in:

  • A.B. Atkinson & F. Bourguignon (ed.), 2000. "Handbook of Income Distribution," Handbook of Income Distribution, Elsevier, edition 1, volume 1, number 1, 00.
    This item is provided by Elsevier in its series Handbook of Income Distribution with number 1-07.

    Handle: RePEc:eee:incchp:1-07

    Contact details of provider:
    Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. Labor Economics (ECON 531)

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:incchp:1-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.