On the Covariance Structure of Earnings and Hours Changes

62 Pages Posted: 27 Feb 2001 Last revised: 10 Jul 2010

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: February 1986

Abstract

This paper presents an empirical analysis of changes in individual earnings and hours over time. Using longitudinal data from three panel surveys,we catalogue the main features of the covariance structure of changes in earnings and hours. We then present an interpretation of these features in terms of both a life-cycle labor supply model and a fixed-wage labor contract model. Our major findings are:(1) there is a remarkable similarity in the covariance structure of earnings and hours changes across the three surveys; and (2) apart from simple measurement error, the major component of variance in earnings and hours affects earnings and hours equi-proportionately.

Suggested Citation

Abowd, John Maron and Card, David E., On the Covariance Structure of Earnings and Hours Changes (February 1986). NBER Working Paper No. w1832, Available at SSRN: https://ssrn.com/abstract=237137

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