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The dynamics and inequality of Italian male earnings: permanent changes or transitory fluctuations?

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  • Lorenzo Cappellari

    () (Università degli Studi del Piemonte Orientale)

Abstract

This paper looks at longitudinal aspects of changes in Italian male earnings inequality since the late 1970s by decomposing the earnings autocovariance structure into its persistent and transitory parts. Cross-sectional earnings differentials are found to grow over the period. The longitudinal analysis shows that such growth is determined by the permanent earnings component and is due both to a divergence of earnings profiles over the working career and an increase in overall persistence during the first half of the 1990s. Using these estimates to analyse low pay probabilities shows that it became more persistent for all birth cohorts; consequently, the probability of repeated low pay episodes also increased during the sample period. When allowing for occupation-specific components in the parameters of interest, life time earnings divergence is found to characterise the non-manual earnings distribution.

Suggested Citation

  • Lorenzo Cappellari, 2002. "The dynamics and inequality of Italian male earnings: permanent changes or transitory fluctuations?," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C2-2, International Conferences on Panel Data.
  • Handle: RePEc:cpd:pd2002:c2-2
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    References listed on IDEAS

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    Cited by:

    1. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute for the Study of Labor (IZA).
    2. Lorenzo Cappellari & Marco Leonardi, 2016. "Earnings Instability and Tenure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(2), pages 202-234, April.
    3. Matz Dahlberg & Magnus Gustavsson, 2008. "Inequality and Crime: Separating the Effects of Permanent and Transitory Income," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(2), pages 129-153, April.
    4. Anna M. Falzoni & Alessandra Venturini & Claudia Villosio, 2004. "Wage Differentials and International Trade in Italy Using Individual Micro Data 1991-1996," Development Working Papers 190, Centro Studi Luca d'Agliano, University of Milano.
    5. María Cervini-Plá & Xavier Ramos, 2012. "Long-Term Earnings Inequality, Earnings Instability and Temporary Employment in Spain: 1993–2000," British Journal of Industrial Relations, London School of Economics, vol. 50(4), pages 714-736, December.
    6. Michal Myck & Richard Ochmann & Salmai Qari, 2008. "Dynamics of Earnings and Hourly Wages in Germany," SOEPpapers on Multidisciplinary Panel Data Research 139, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Giesecke, Matthias & Bönke, Timm & Lüthen, Holger, 2011. "The Dynamics of Earnings in Germany: Evidence from Social Security Records," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48692, Verein für Socialpolitik / German Economic Association.
    8. Xavi Ramos & Christian Schluter, 2003. "Subjective Income Expectations, Canonical Models and Income Risk," Working Papers wpdea0310, Department of Applied Economics at Universitat Autonoma of Barcelona.
    9. Ramos, Xavier, 2001. "The dynamics of individual male earnings in Great Britain: 1991-1999," ISER Working Paper Series 2001-15, Institute for Social and Economic Research.
    10. Martin Biewen, 2005. "The Covariance Structure of East and West German Incomes and its Implications for the Persistence of Poverty and Inequality," German Economic Review, Verein für Socialpolitik, vol. 6(4), pages 445-469, November.
    11. repec:sbe:breart:v:27:y:2007:i:2:a:1528 is not listed on IDEAS
    12. Gustavsson, Magnus, 2004. "Trends in the Transitory Variance of Earnings: Evidence from Sweden 1960-1990 and a Comparison with the United States," Working Paper Series 2004:11, Uppsala University, Department of Economics.
    13. Zhao, Zhong, 2007. "Earnings Instability and Earnings Inequality in Urban China: 1989–2006," IZA Discussion Papers 3270, Institute for the Study of Labor (IZA).
    14. Arabage, Amanda Cappellazzo & Souza, André Portela Fernandes de, 2015. "Labor earnings dynamics in post-stabilization Brazil," Textos para discussão 390, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    15. Anna M. Falzoni & Alessandra Venturini & Claudia Villosio, 2007. "Skilled and Unskilled Wage Dynamics in Italy in the ‘90s: Changes in the individual characteristics, institutions, trade and technology," LABORatorio R. Revelli Working Papers Series 61, LABORatorio R. Revelli, Centre for Employment Studies.
    16. Ramos, Xavier & Schluter, Christian, 2006. "Subjective Income Expectations and Income Risk," IZA Discussion Papers 1950, Institute for the Study of Labor (IZA).
    17. Andrea Borgarello & Francesco Devicienti, 2002. "What Accounts For the Rise in Wage Inequality in Italy? Evidence from Administrative Matched Employer-Employee Data, 1985-1996," LABORatorio R. Revelli Working Papers Series 18, LABORatorio R. Revelli, Centre for Employment Studies.

    More about this item

    Keywords

    Earnings Inequality; Earnings Dynamics; Minimum Distance Estimation;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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