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Permanent and transitory wages of British men, 1975-2001: year, age and cohort effects

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  • Adriaan S. Kalwij

    (Utrecht School of Economics, Utrecht University, The Netherlands)

  • Rob Alessie

Abstract

We examine the mean and variance-covariance structure of log-wages over calendar time and the life cycle of British men, hereby controlling for birth cohort effects. We attribute the strong increase in mean log-wage during the 1980s and 1990s to a rise in mean log-wage with the year of birth. This rise is diminishing with the year of birth, which implies lower wage inequality between cohorts with the year of birth. Wage inequality has increased during the 1980s and early 1990s and remained fairly stable in the second half of the 1990s. The year effects, however, show increasing wage inequality up to 2001, mainly due to a strong rise in transitory wage inequality. Transitory wages are strongly correlated over time and an increase in transitory wage inequality therefore has highly persistent inequality consequences. The stable wage inequality in the second half of the 1990s is attributed to lower within-cohort wage inequality for the younger cohorts. The age effects show that permanent wage inequality increases with age, in particular up to age 30 and over age 50. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Adriaan S. Kalwij & Rob Alessie, 2007. "Permanent and transitory wages of British men, 1975-2001: year, age and cohort effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 1063-1093.
  • Handle: RePEc:jae:japmet:v:22:y:2007:i:6:p:1063-1093
    DOI: 10.1002/jae.941
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    References listed on IDEAS

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    Cited by:

    1. Doris, Aedin & O'Neill, Donal & Sweetman, Olive, 2008. "Does Growth Affect the Nature of Inequality? Ireland 1994–2001," IZA Discussion Papers 3701, Institute for the Study of Labor (IZA).
    2. Aedín Doris & Donal O’Neill & Olive Sweetman, 2013. "Identification of the covariance structure of earnings using the GMM estimator," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(3), pages 343-372, September.
    3. Pedro Albarran & Raquel Carrasco & Maite Martinez-Granado, 2009. "Inequality for Wage Earners and Self-Employed: Evidence from Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(4), pages 491-518, August.
    4. Magnac, Thierry & Pistolesi, Nicolas & Roux, Sébastien, 2013. "Post schooling human capital investments and the life cycle variance of earnings," TSE Working Papers 13-380, Toulouse School of Economics (TSE).
    5. Higgins, Tim & Sinning, Mathias, 2013. "Modeling income dynamics for public policy design: An application to income contingent student loans," Economics of Education Review, Elsevier, vol. 37(C), pages 273-285.
    6. Kosei Fukuda, 2013. "A Happiness Study Using Age-Period-Cohort Framework," Journal of Happiness Studies, Springer, vol. 14(1), pages 135-153, March.
    7. Peng, Fei & Kang, Lili, 2013. "Cyclical changes in the wage structure of the United Kingdom: a historical review of the GHS 1972-2002," MPRA Paper 47210, University Library of Munich, Germany.
    8. Cappellari, Lorenzo & Jenkins, Stephen P., 2013. "Earnings and Labour Market Volatility in Britain," IZA Discussion Papers 7491, Institute for the Study of Labor (IZA).
    9. Cappellari, Lorenzo & Jenkins, Stephen P., 2014. "Earnings and labour market volatility in Britain, with a transatlantic comparison," Labour Economics, Elsevier, vol. 30(C), pages 201-211.
    10. Theloudis, Alexandros, 2011. "From income and consumption inequality to economic welfare inequality: the role of labor supply," MPRA Paper 37517, University Library of Munich, Germany.
    11. Cappellari, Lorenzo & Jenkins, Stephen P., 2014. "Earnings and labour market volatility in Britain, with a transatlantic comparison," Labour Economics, Elsevier, vol. 30(C), pages 201-211.

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