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Jobs, Workers and Changes in Earnings Dispersion

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  • Simon Burgess
  • Julia Lane
  • David Stevens

Abstract

The 'fractal' nature of the rise in earnings dispersion is one of its key features and remains a puzzle. In this paper, we offer a new perspective on the causes of changes in earnings dispersion, focusing on the role of labour reallocation. Once we drop the assumption that all firms pay a given worker the same, the allocation of workers to firms matters for the dispersion of earnings. This perspective highlights two new factors that can affect the dispersion of earnings: rates of job and worker reallocation, and the nature of the process allocating workers to jobs. We set out a framework capturing this idea and quantify the impact of reallocation on earnings dispersion, using a dataset that comprises almost the universe of workers and the universe of employers in Maryland. We show that these factors have potentially large effects in general on earnings dispersion. In the case of Maryland over the period 1985-1994, the changing allocation of workers to jobs played a significant role in explaining movements in the dispersion of earnings.

Suggested Citation

  • Simon Burgess & Julia Lane & David Stevens, 2001. "Jobs, Workers and Changes in Earnings Dispersion," CEP Discussion Papers dp0491, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0491
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    References listed on IDEAS

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    Cited by:

    1. Atkinson Anthony B., 2000. "The Changing Distribution of Income: Evidence and Explanations," German Economic Review, De Gruyter, vol. 1(1), pages 3-18, February.
    2. Simon Burgess, 1999. "The Reallocation of Labour: An International Comparison Using Job Tenure," CEP Discussion Papers dp0416, Centre for Economic Performance, LSE.
    3. 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.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2629-2710 is not listed on IDEAS

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    More about this item

    Keywords

    Earnings inequality; labour reallocation; matched worker and firm panels;
    All these keywords.

    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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