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

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  • Robert A. Moffitt
  • Peter Gottschalk

Abstract

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.

Suggested Citation

  • Robert A. Moffitt & Peter Gottschalk, 2011. "Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004," NBER Working Papers 16833, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16833
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    Cited by:

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    2. Till van Treeck, 2012. "Did inequality cause the U.S. financial crisis?," IMK Working Paper 91-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Magnac, Thierry & Pistolesi, Nicolas & Roux, Sébastien, 2013. "Post schooling human capital investments and the life cycle variance of earnings," TSE Working Papers 13-380, Toulouse School of Economics (TSE).
    4. Maurice J.G. Bun & Jasper Winter, 2022. "Capital and labor misallocation in the Netherlands," Journal of Productivity Analysis, Springer, vol. 57(1), pages 93-113, February.
    5. Key, Nigel & Prager, Daniel & Burns, Christopher, 2017. "Farm Household Income Volatility: An Analysis Using Panel Data From a National Survey," Economic Research Report 256710, United States Department of Agriculture, Economic Research Service.
    6. Joseph G. Altonji & Anthony A. Smith Jr. & Ivan Vidangos, 2013. "Modeling Earnings Dynamics," Econometrica, Econometric Society, vol. 81(4), pages 1395-1454, July.
    7. Paul Bingley & Lorenzo Cappellari & Niels Westergård-Nielsen, 2011. "Flexicurity, Wage Dynamics and Inequality over the Life-Cycle," CESifo Working Paper Series 3561, CESifo.
    8. Jeffrey Brown & Chichun Fang & Francisco Gomes, 2012. "Risk and Returns to Education," NBER Working Papers 18300, National Bureau of Economic Research, Inc.
    9. Alessio Tomelleri, 2022. "Earnings instability and non-standard employment: cohort-based evidence from the Italian labour market," FBK-IRVAPP Working Papers 2022-02, Research Institute for the Evaluation of Public Policies (IRVAPP), Bruno Kessler Foundation.
    10. Sabelhaus, John & Song, Jae, 2009. "Earnings Volatility Across Groups and Time," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(2), pages 347-364, June.
    11. Ivan Vidangos & Joseph Altonji, 2014. "Marriage Dynamics, Earnings Dynamics, and Lifetime Family Income," 2014 Meeting Papers 1230, Society for Economic Dynamics.
    12. Louis Chauvel & Anne Hartung & Flaviana Palmisano, 2017. "Dynamics of Income Rank Volatility: Evidence from Germany and the US," SOEPpapers on Multidisciplinary Panel Data Research 926, DIW Berlin, The German Socio-Economic Panel (SOEP).
    13. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
    14. Maurice Bun & Jasper de Winter, 2019. "Measuring trends and persistence in capital and labor misallocation," DNB Working Papers 639, Netherlands Central Bank, Research Department.

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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