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Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation

US Census Bureau Center for Economic Studies Paper No. CES-WP-10-32

39 Pages Posted: 9 Oct 2010

See all articles by Fredrik Andersson

Fredrik Andersson

Office of the Comptroller of the Currency (OCC)

Elizabeth E. Davis

University of Minnesota - Department of Applied Economics

Matthew Freedman

University of California, Irvine - Department of Economics

Julia Lane

Institute for the Study of Labor (IZA); Wagner Graduate School of Public Service

Brian P. McCall

University of Michigan at Ann Arbor, School of Education; University of Michigan at Ann Arbor, College of Literature, Science & the Arts, Department of Economics

Lee Kristin Sandusky

U.S. Census Bureau

Multiple version iconThere are 3 versions of this paper

Date Written: September 1, 2010

Abstract

This paper uses matched employer-employee data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in wage inequality within and across industries between 1992 and 2003. We find that the entry and exit of firms and the sorting of workers and firms based on underlying worker skills are important sources of changes in earnings distributions over time. Our results suggest that the underlying dynamics driving changes in earnings inequality are complex and are due to factors that cannot be measured in standard cross-sectional data.

Keywords: Inequality, Decomposition, Human Capital, Reallocation

JEL Classification: C23, J24, J31, J48, J63

Suggested Citation

Andersson, Per Fredrik Daniel and Davis, Elizabeth E. and Freedman, Matthew and Lane, Julia and Lane, Julia and McCall, Brian P. and Sandusky, Lee Kristin, Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation (September 1, 2010). US Census Bureau Center for Economic Studies Paper No. CES-WP-10-32, Available at SSRN: https://ssrn.com/abstract=1689086 or http://dx.doi.org/10.2139/ssrn.1689086

Per Fredrik Daniel Andersson

Office of the Comptroller of the Currency (OCC) ( email )

400 7th St. SW
Washington, DC 20219-0001
United States
202-649-5528 (Phone)
571-465-3246 (Fax)

Elizabeth E. Davis

University of Minnesota - Department of Applied Economics ( email )

1994 Buford Avenue
St. Paul, MN 55108
United States

Matthew Freedman

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

Julia Lane

Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org

Brian P. McCall

University of Michigan at Ann Arbor, School of Education ( email )

610 East University Avenue
Ann Arbor, MI 48109-1259
United States

HOME PAGE: http://www-personal.umich.edu/~bpmccall/

University of Michigan at Ann Arbor, College of Literature, Science & the Arts, Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Lee Kristin Sandusky (Contact Author)

U.S. Census Bureau ( email )

4600 Silver Hill Road
Washington, DC 20233
United States

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