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Earnings Instability of Job Stayers and Job Changers

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  • Leonardi, Marco

    ()
    (University of Milan)

Abstract

I use the PSID to decompose the rise in wage inequality into a permanent and a transitory component. I consider separately job stayers and job changers. I find that earnings instability (the variance of the transitory component of earnings) increased much more among job changers than among job stayers. I interpret the evidence in a search and matching model with on-the-job search. The increasing variance of the transitory component of earnings is modeled as a mean-preserving spread of the distribution of productivity shocks. The meanpreserving spread induces on-the-job search on a wider range of productivity values. As a result of increased on-the-job search, the variance of the transitory part of earnings increases among job changers. The direction of the change in the transitory variance across job stayers is ambiguous and depends on their composition between non-seekers and on-the-job seekers who did not find a new job.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 946.

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Length: 38 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:iza:izadps:dp946

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Keywords: earnings instability; on-the-job search;

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References

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  11. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
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  14. 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.
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Citations

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Cited by:
  1. Lorenzo Cappellari & Marco Leonardi, 2013. "Earnings Instability and Tenure," CESifo Working Paper Series 4145, CESifo Group Munich.
  2. Cervini-Plá, María & Ramos, Xavi, 2008. "Long Term Earnings Inequality, Earnings Instability and Temporary Employment in Spain: 1993–2000," IZA Discussion Papers 3538, Institute for the Study of Labor (IZA).
  3. Flabbi, Luca & Leonardi, Marco, 2010. "Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market," European Economic Review, Elsevier, Elsevier, vol. 54(6), pages 832-854, August.

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