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The Dynamics of Earnings in Chile

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  • Cristóbal Huneeus
  • Andrea Repetto

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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.

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Bibliographic Info

Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 183.

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Date of creation: 2004
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Handle: RePEc:edj:ceauch:183

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  1. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
  2. Javier Alvarez & Martin Browning & Mette Ejrnæs, 2002. "Modelling income processes with lots of heterogeneity," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D2-3, International Conferences on Panel Data.
  3. 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.
  4. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  5. Eduardo M.R.A. Engel & Alexander Galetovic & Claudio E. Raddatz, 1998. "Taxes and Income Distribution in Chile: Some Unpleasant Redistributive Arithmetic," NBER Working Papers 6828, National Bureau of Economic Research, Inc.
  6. Orazio Attanasio & Steven J. Davis, 1994. "Relative Wage Movements and the Distribution of Consumption," NBER Working Papers 4771, National Bureau of Economic Research, Inc.
  7. Pischke, J.S., 1993. "Individual Income, Incomplete Information, and Aggregate Consumption," Working papers 93-16, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. 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.
  9. 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.
  10. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  11. 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.
  12. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
  13. 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.
  14. 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.
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Cited by:
  1. 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.
  2. Jose Cuesta & Hugo Ñopo & Georgina Pizzolitto, 2011. "Using Pseudo‐Panels To Measure Income Mobility In Latin America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(2), pages 224-246, 06.
  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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