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Earnings dynamics of men and women in Finland: permanent inequality versus earnings instability

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  • Otto Kässi

Abstract

I decompose the earnings variance of Finnish male and female workers into its permanent and transitory components using the approach of Baker (J Labor Econ,15:338–375, 1997 ) and Haider (J Labor Econ, 19:799–836, 2001 ) in the spirit of scientific replication. I find that the increasing earnings inequality of men and women is driven by both the transitory and permanent components of earnings. In addition, I find considerable differences in the earnings dynamics of men and women, that have been largely neglected in previous studies of earnings dynamics. The inequality among men is dominated by the permanent component. Conversely, permanent and transitory components are of comparable magnitudes to women. As a corollary, men experience more stable income paths but display larger permanent earnings differences. Women, on the other hand, face more unstable earnings profiles but show smaller permanent differences in earnings. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Otto Kässi, 2014. "Earnings dynamics of men and women in Finland: permanent inequality versus earnings instability," Empirical Economics, Springer, vol. 46(2), pages 451-477, March.
    • Handle: RePEc:spr:empeco:v:46:y:2014:i:2:p:451-477
    DOI: 10.1007/s00181-013-0693-6
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    1. Gustafsson, Johan & Holmberg, Johan, 2023. "Permanent and transitory earnings dynamics and lifetime income inequality in Sweden," Labour Economics, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Earnings distribution; Earnings dynamics; Permanent inequality; Transitory inequality; Variance decomposition; J31; J62;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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