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

  • Fredrik Andersson
  • Elizabeth E. Davis
  • Matthew L. Freedman
  • Julia I. Lane
  • Brian P. Mccall
  • Kristin Sandusky

This paper uses matched employer-employee data from the Longitudinal Employer Household Dynamics database to investigate the contribution of worker and firm reallocation to within industry changes in wage inequality between 1992 and 2003. We find that the entry and exit of firms and the sorting of workers and firms based on underlying worker "skills" are important determinants of changes in industry earnings distributions over time. Our results suggest that the underlying dynamics of earnings inequality are complex and are due to factors that cannot be measured in standard crosssectional data.

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File URL: http://hdl.handle.net/10.1111/10.1111/j.1468-232X.2012.00697.x
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Article provided by Wiley Blackwell in its journal Industrial Relations: A Journal of Economy and Society.

Volume (Year): 51 (2012)
Issue (Month): 4 (October)
Pages: 779-810

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Handle: RePEc:bla:indres:v:51:y:2012:i:4:p:779-810
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