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Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation

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Author Info

  • Andersson, Fredrik

    () (U.S. Department of the Treasury)

  • Davis, Elizabeth E.

    () (University of Minnesota)

  • Freedman, Matthew L.

    () (Cornell University)

  • Lane, Julia

    () (American Institutes for Research)

  • McCall, Brian P.

    () (University of Michigan)

  • Sandusky, L. Kristin

    () (U.S. Census Bureau)

Abstract

This paper exploits longitudinal employer-employee matched data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in earnings inequality within and across industries between 1992 and 2003. We find that factors that cannot be measured using standard cross-sectional data, including the entry and exit of firms and the sorting of workers across firms, are important sources of changes in earnings distributions over time. Our results also suggest that the dynamics driving changes in earnings inequality are heterogeneous across industries.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6182.

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Length: 43 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6182

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Keywords: inequality; linked employer-employee data; sorting;

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References

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Cited by:
  1. Card, David & Heining, Jörg & Kline, Patrick, 2012. "Workplace heterogeneity and the rise of West German wage inequality," IAB Discussion Paper 201226, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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