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The dynamics of individual male earnings in Great Britain: 1991-1999

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  • Ramos, Xavier

Abstract

In this paper I analyse the dynamic structure of earnings in Great Britain for the period 1991-1999 by decomposing the earnings covariance structure into its permanent and transitory components. Using information on monthly earnings of male full-time employees from the first nine waves of the British Household Panel Study I find that earnings inequality increases over the Nineties. However, earnings mobility may have also increased. That is, for this period earnings persistence falls. Surprisingly, I also find that relative earnings persistence declines over the life cycle, which implies lower mobility for younger cohorts. This evidence is at odds with previous literature on earnings dynamics both for Britain and other OECD countries. Unlike recent studies, I also consider the effects of observed characteristics on the covariance structure of log earnings and find that human capital and job related characteristics account for nearly all persistent earnings differences and that the transitory component is highly persistent.

Suggested Citation

  • 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.
  • Handle: RePEc:ese:iserwp:2001-15
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    File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2001-15.pdf
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    Cited by:

    1. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute of Labor Economics (IZA).
    2. 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.

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