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

  • Lorenzo Cappellari

    ()

    (Università degli Studi del Piemonte Orientale)

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.

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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number C2-2.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:c2-2
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