Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation
Office of the Comptroller of the Currency (OCC)
Elizabeth E. Davis
University of Minnesota - Department of Applied Economics
American Institutes for Research; Institute for the Study of Labor (IZA)
Brian P. McCall
University of Minnesota - Twin Cities - Carlson School of Management
U.S. Census Bureau
IZA Discussion Paper No. 6182
This paper exploits longitudinal employer-employee matched data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in earnings inequality within and across industries between 1992 and 2003. We find that factors that cannot be measured using standard cross-sectional data, including the entry and exit of firms and the sorting of workers across firms, are important sources of changes in earnings distributions over time. Our results also suggest that the dynamics driving changes in earnings inequality are heterogeneous across industries.
Number of Pages in PDF File: 43
Keywords: inequality, linked employer-employee data, sorting
JEL Classification: J0, J30
Date posted: December 17, 2011
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