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Earnings mobility and distribution: Comparing statistical models on Swedish data

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  • Palme, Marten

Abstract

There are at least two instrumental motives for studying earnings mobility. First, to extend the analysis of income distribution to more than one time period. Second, to predict future individual earnings. For both these motives, adequate models of earnings mobility are needed. This study compares the usefulness of different statistical models (human capital and stochastic models), previously used to estimate earnings mobility, in predicting future individual earnings and earnings distributions. Special attention is given to the effect of considering individual heterogeneity. A 20- year panel, collected from the Swedish Level of Living Survey, of 651 employed men is used. The models are estimated on 17 periods and predictions are made for 3. It is found that a dynamic human capital model gives the best predictions of individual earnings.
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Suggested Citation

  • Palme, Marten, 1995. "Earnings mobility and distribution: Comparing statistical models on Swedish data," Labour Economics, Elsevier, vol. 2(3), pages 213-247, September.
  • Handle: RePEc:eee:labeco:v:2:y:1995:i:3:p:213-247
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    References listed on IDEAS

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    1. Creedy, John, 1980. "The New Government Pension Scheme: A Simulation Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(1), pages 51-64, February.
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    8. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    9. Creedy, John, 1982. "The British State Pension: Contributions, Benefits and Indexation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 44(2), pages 97-112, May.
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    Cited by:

    1. Gustavsson, Magnus & Österholm, Pär, 2014. "Does the labor-income process contain a unit root? Evidence from individual-specific time series," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 152-167.
    2. Holtz-Eakin, Douglas & Rosen, Harvey S & Weathers, Robert, 2000. "Horatio Alger Meets the Mobility Tables," Small Business Economics, Springer, vol. 14(4), pages 243-274, June.
    3. Gustavsson, Magnus, 2002. "Earnings Dynamics and Inequality during Macroeconomic Turbulence: Sweden 1991-1999," Working Paper Series 2002:20, Uppsala University, Department of Economics.

    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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