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Decomposition of Labor Earnings Growth: Recovering Gaussianity?

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Listed:
  • Pierre Pora

    (CREST; INSEE.)

  • Lionel Wilner

    (CREST; INSEE.)

Abstract

Recent works have concluded to non-Gaussian features of labor earnings growth. We argue in this paper that it is mainly due to working hours'volatility. Using the non-parametric approach developed by Guvenen et al. (2016), we find on French data that labor earnings changes exhibit strong asymmetry as well as high peakedness. However, after decomposing labor earnings growth into wage and working time growth, the log-normality of hourly wages remains a quite plausible assumption since deviations from Gaussianity stem mainly from working time changes. The joint dynamics of hourly wages and working time help explain those deviations which relate most likely to labor supply decisions at the extensive margin.

Suggested Citation

  • Pierre Pora & Lionel Wilner, 2019. "Decomposition of Labor Earnings Growth: Recovering Gaussianity?," Working Papers 2019-03, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2019-03
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    References listed on IDEAS

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    Cited by:

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    2. Manuel Arellano & Stéphane Bonhomme & Micole De Vera & Laura Hospido & Siqi Wei, 2022. "Income risk inequality: Evidence from Spanish administrative records," Quantitative Economics, Econometric Society, vol. 13(4), pages 1747-1801, November.
    3. Manuel Arellano & Stéphane Bonhomme, 2023. "Recovering Latent Variables by Matching," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 118(541), pages 693-706, January.
    4. Magnac, Thierry & Roux, Sébastien, 2021. "Heterogeneity and wage inequalities over the life cycle," European Economic Review, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    Labor earnings growth; non-Gaussian distributions; skewness; kurtosis.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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