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Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004

  • Robert Moffitt
  • Peter Gottschalk

We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but only approximate methods, we find that the transitory variance started to increase in the early 1970s, continued to increase through the mid-1980s, and then remained at this new higher level through the 1990s and beyond. Thus the increase mostly occurred about thirty years ago. Its increase accounts for between 31 and 49 percent of the total rise in cross-sectional variance, depending on the time period.

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Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 578.

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Date of creation: Feb 2011
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Handle: RePEc:jhu:papers:578
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