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Revisiting wage, earnings, and hours profiles

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  • Rupert, Peter
  • Zanella, Giulio

Abstract

We document empirical life cycle profiles of wages, earnings, and hours of work for pay from the Panel Study of Income Dynamics, following the same workers for up to four decades along the intensive margin of labor supply. For six of the eight cohorts we analyze the wage profile does not decline with age, while the earnings profile always does. The discrepancy is explained by a sharp drop of the hours profile beginning shortly after age 50, when many workers start a smooth transition into retirement by working progressively fewer hours. This pattern is not an artifact of staggered abrupt retirement, and is robust to attrition- and selection correction (i.e., to taking into account that the composition of our sample, for a given cohort, changes over time). We explore the nontrivial restrictions on dynamic models of the aggregate economy that this evidence suggests, and we provide numerical profiles that can be readily used in quantitative macroeconomic analysis.

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  • Rupert, Peter & Zanella, Giulio, 2012. "Revisiting wage, earnings, and hours profiles," University of California at Santa Barbara, Economics Working Paper Series qt61f2f1hv, Department of Economics, UC Santa Barbara.
    • Handle: RePEc:cdl:ucsbec:qt61f2f1hv
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    Cited by:

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    3. Barry T. Hirsch & John V. Winters, 2014. "An Anatomy Of Racial and Ethnic Trends in Male Earnings in the U.S," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 930-947, December.
    4. Kadija Charni & Stephen Bazen, 2017. "Do earnings really decline for older workers?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 38(1), pages 4-24, April.
    5. Rupert, Peter & Zanella, Giulio, 2018. "Grandchildren and their grandparents' labor supply," Journal of Public Economics, Elsevier, vol. 159(C), pages 89-103.
    6. Minchul Yum, 2023. "Parental Time Investment And Intergenerational Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 187-223, February.
    7. Pollak, Andreas, 2013. "Employment Insurance and the Business Cycle," MPRA Paper 49358, University Library of Munich, Germany.
    8. Duo Qin & Sophie van H¸llen & Qing-Chao Wang, 2014. "What Happens to Wage Elasticities When We Strip Playometrics? Revisiting Married Women Labour Supply Model," Working Papers 190, Department of Economics, SOAS University of London, UK.
    9. Minchul Yum, 2015. "Parental Time Investment and Human Capital Formation: A Quantitative Analysis of Intergenerational Mobility," 2015 Meeting Papers 996, Society for Economic Dynamics.
    10. Heylen Freddy & Van de Kerckhove Renaat, 2013. "Employment by age, education, and economic growth: effects of fiscal policy composition in general equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 49-103, October.
    11. Keller, Elisa, 2014. "The slowdown in American educational attainment," Journal of Economic Dynamics and Control, Elsevier, vol. 46(C), pages 252-270.
    12. Alexander Ludwig & Dirk Krueger, 2015. "Optimal Capital and Progressive Labor Income Taxation with Endogenous Schooling Decisions and Intergenerational Transfers," 2015 Meeting Papers 334, Society for Economic Dynamics.
    13. Alexander Ludwig & Dirk Krueger, 2010. "Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation," 2010 Meeting Papers 388, Society for Economic Dynamics.

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