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Decomposing the Sources of Earnings Inequality Assessing the Role of Reallocation

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  • 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 Longitudinal Employer Household Dynamics database to investigate the contribution of worker and firm reallocation to within industry changes in wage inequality 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 determinants of changes in industry earnings distributions over time. Our results suggest that the underlying dynamics of earnings inequality are complex and are due to factors that cannot be measured in standard crosssectional data.

Suggested Citation

  • Fredrik Andersson & Elizabeth E. Davis & Matthew L. Freedman & Julia I. Lane & Brian P. McCall & L. Kristin Sandusky, "undated". "Decomposing the Sources of Earnings Inequality Assessing the Role of Reallocation," Working Papers 0106, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
    • Handle: RePEc:hrr:papers:0106
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    Cited by:

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

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    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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