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

Author

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

Abstract

This paper uses matched employer-employee data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in wage inequality within and across industries 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 sources of changes in earnings distributions over time. Our results suggest that the underlying dynamics driving changes in earnings inequality are complex and are due to factors that cannot be measured in standard cross-sectional data.

Suggested Citation

  • Fredrik Andersson & Elizabeth E. Davis & Matthew L. Freedman & Julia I. Lane & Brian P. McCall & L. Kristin Sandusky, 2010. "Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation," Working Papers 10-32, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:10-32
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    Cited by:

    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    2. Noe Wiener, 2018. "Measuring Labor Market Segmentation from Incomplete Data," UMASS Amherst Economics Working Papers 2018-01, University of Massachusetts Amherst, Department of Economics.
    3. Isaac Sorkin, 2018. "Ranking Firms Using Revealed Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 133(3), pages 1331-1393.

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    More about this item

    Keywords

    Inequality; Decomposition; Human Capital; Reallocation;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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