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Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations?

Author

Listed:
  • Aedin Doris

    () (Economics,Finance and Accounting National University of Ireland, Maynooth)

  • Donal O'Neill

    () (Economics,Finance and Accounting National University of Ireland,)

  • Olive Sweetman

    () (Economics,Finance and Accounting National University of Ireland,)

Abstract

This paper examines the relationship between aggregate inequality and its underlying components for a number of European countries. We use a well established GMM approach to separate the permanent component from the transitory component of earnings inequality. Our results show that three quarters of the observed cross-country differences in aggregate inequality in Europe is accounted for by differences in permanent inequality, reflecting differences in individual characteristics that persist throughout the life-cycle.

Suggested Citation

  • Aedin Doris & Donal O'Neill & Olive Sweetman, 2010. "Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations?," Economics, Finance and Accounting Department Working Paper Series n211-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n211-10.pdf
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    Cited by:

    1. Aedín Doris & Donal O’Neill & Olive Sweetman, 2013. "Identification of the covariance structure of earnings using the GMM estimator," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(3), pages 343-372, September.
    2. Stephen Jenkins & Peter Lambert, 2011. "Robert Moffitt and Peter Gottschalk’s 1995 paper ‘Trends in the covariance structure of earnings in the US: 1969–1987’," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 433-437, September.
    3. Aedin Doris & Donal O'Neill & Olive Sweetman, 2010. "GMMCOVEARN: A Stata Module for GMM Estimation of the Covariance Structure of Earnings," Economics, Finance and Accounting Department Working Paper Series n212-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

    More about this item

    Keywords

    Permanent Inequality; Transitory Inequality; Generalized Method of Moments; Covariance Structure of Earnings;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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