From Age-Earnings Profiles to the Distribution of Earnings and Human Wealth

Abstract

Recent development of explicit theoretical and empirical earnings functions from life cycle human capital investment models increases the potential to explain existing earnings distributions and to predict changes in it. The purpose of this paper is to suggest how these earnings functions can be used more directly to derive predicted earnings and human wealth distributions for populations and sub-populations with an empirical illustration. This is accomplished by an application if statistical distribution theory as a link between the earnings function and the earnings distribution.