40 Pages Posted: 1 Jun 2006 Last revised: 27 Oct 2011
Date Written: October 27, 2011
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.
Keywords: matched employer-employee data, earnings inequality, job reallocation, worker reallocation, firm entry, firm exit
JEL Classification: J00, J63, J31
Suggested Citation: Suggested Citation
Lane, Julia and Andersson, Fredrik and Davis, Elizabeth E. and Freedman, Matthew and McCall, Brian P. and Sandusky, Lee Kristin, Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation (October 27, 2011). Available at SSRN: https://ssrn.com/abstract=905006 or http://dx.doi.org/10.2139/ssrn.905006