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Decomposing the Sources of Earnings Inequality: Assessing the Role of ReallocationJulia LaneAmerican Institutes for Research; Institute for the Study of Labor (IZA) Fredrik AnderssonGovernment of the United States of America - Risk Analysis Division Elizabeth E. DavisUniversity of Minnesota - Department of Applied Economics Matthew FreedmanCornell University - Department of Economics; Cornell University - School of Industrial and Labor Relations Brian P. McCallUniversity of Minnesota - Twin Cities - Carlson School of Management Kristin SanduskyU.S. Census Bureau October 27, 2011 Abstract: 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: 40 Keywords: matched employer-employee data, earnings inequality, job reallocation, worker reallocation, firm entry, firm exit JEL Classification: J00, J63, J31 working papers seriesDate posted: June 1, 2006 ; Last revised: October 27, 2011Suggested CitationContact Information
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