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Inequality for wage earners and self-employed : evidence from panel data

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  • Pedro Albarran
  • Raquel Carrasco

    ()

  • Maite Martinez Granado

Abstract

In this paper we study the evolution of income inequality for employees and self-employed workers. We highlight the importance of separately analyze these different sources of income to gain a broader understanding of inequality. Using Spanish panel data on income and consumption from the ECPF for the period 1987-96, we decompose income shocks into a permanent and a transitory component. We find that there are noticeable differences in the evolution of income inequality, as well as in the relative importance of the permanent and transitory components across these groups. Our results points that the evolution of inequality can be basically explained by movements in the transitory component of income for the self-employed, while for the employees it is mainly driven by the permanent component, specially at the end of the period. Given these disparities, it seems that these two sources of income should be studied separately and that different policies are suitable for each group.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we072414.

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Date of creation: Mar 2007
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Handle: RePEc:cte:werepe:we072414

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  1. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers, Institute for Fiscal Studies W04/28, Institute for Fiscal Studies.
  2. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(3), pages 445-67, June.
  3. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
  4. Giorgio E. Primiceri & Thijs van Rens, 2006. "Heterogeneous life-cycle profiles, income risk and consumption inequality," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 945, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2008.
  5. Carrington, William J & McCue, Kristin & Pierce, Brooks, 1996. "The Role of Employer-Employee Interactions in Labor Market Cycles: Evidence from the Self-Employed," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(4), pages 571-602, October.
  6. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3661, C.E.P.R. Discussion Papers.
  7. Fatih Guvenen, 2005. "An Empirical Investigation of Labor Income Processes," Macroeconomics, EconWPA 0508026, EconWPA.
  8. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, Elsevier, vol. 8(2), pages 191-210, October.
  9. Albarran, P., 2000. "Income Uncertainty and Precautionary Saving: Evidence from Household Rotating Panel Data," Papers, Centro de Estudios Monetarios Y Financieros- 0008, Centro de Estudios Monetarios Y Financieros-.
  10. Simon Parker & Tim Barmby & Yacine Belghitar, 2004. "Wage Uncertainty And The Labour Supply Of Self-Employed Workers," Royal Economic Society Annual Conference 2004, Royal Economic Society 67, Royal Economic Society.
  11. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(478), pages C68-C73, March.
  12. Javier Alvarez, 2004. "Dynamics and Seasonality in Quarterly Panel Data: An Analysis of Earnings Mobility in Spain," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 22, pages 443-456, October.
  13. Jean-Marc Falter, 2007. "Self-employment and earning inequality," Journal of Income Distribution, Journal of Income Distribution, Journal of Income Distribution, vol. 16(2), pages 106-127, June.
  14. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers, Institute for Fiscal Studies W97/15, Institute for Fiscal Studies.
  15. Robert A. Moffitt & Peter Gottschalk, 1995. "Trends in the Variances of Permanent and Transitory Earnings in the U.S. and Their Relation to Earnings Mobility," Boston College Working Papers in Economics, Boston College Department of Economics 444, Boston College Department of Economics, revised 01 Nov 1998.
  16. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(3), pages 604-631, June.
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Cited by:
  1. Josep Pijoan-Mas & Virginia Sánchez-Marcos, 2009. "Spain Is Different: Falling Trends Of Inequeality," Working Papers, CEMFI wp2009_0910, CEMFI.
  2. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
  3. Eisenhauer, Philipp & Pfeiffer, Friedhelm, 2008. "Assessing intergenerational earnings persistence among German workers," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 119-137.
  4. repec:iab:iabzaf:v:41:i:2/3:p:119-137 is not listed on IDEAS
  5. Philipp Eisenhauer & Friedhelm Pfeiffer, 2008. "Assessing Intergenerational Earnings Persistence among German Workers," SOEPpapers on Multidisciplinary Panel Data Research 134, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Gaetano Martino & Cristiano Perugini, 2008. "Income inequality within European regions: determinants and effects on growth," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 52/2008, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  7. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 23(3), pages 271-310.
  8. Ada Ferrer-i-carbonell & X. Ramos & M. Oviedo, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Spain," GINI Country Reports, AIAS, Amsterdam Institute for Advanced Labour Studies spain, AIAS, Amsterdam Institute for Advanced Labour Studies.

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