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Author
A.S. Kalwij
R. Alessie
Year
2003
Title
Permanent and transitory wage ineguality of British men, 1975-2001: year, age and cohort effects
Number of pages
34
Publisher
Unknown Publisher
Serie
AIAS Working Paper
Volume | Edition (Serie)
18
Document type
Report
Faculty
Faculty of Law (FdR)
Abstract
We examine the variance-covariance structure of log-wages over time and over the lifecycle of British men from 1975 to 2001, hereby controlling for cohort effects. Wage inequality has risen sharply during the 1980’s and early 1990’s and remained fairly constant in the second half of the 1990’s. We show that this increase is caused mainly by a strong increase in transitory wage inequality and only to a lesser extent to an increase in permanent wage inequality. The transitory component of log-wages is, however, highly persistent over time: serial correlation decreases from 0.88 over a one-year period to 0.65 over a ten-year period. The constant wage inequality in the second half of the 1990’s is attributed to a slight decrease in permanent wages inequality, a stabilization of the variance of the transitory wage shock, and the strong decrease in transitory wage inequality for the cohorts entering employment since the end of the 1980’s. Ignoring age effects in transitory wage inequality and cohort effects, as is commonly done, leads to severely distorted inferences concerning the changes in permanent wage inequality.
Language
Undefined/Unknown
Permalink
http://hdl.handle.net/11245/1.427088
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  • 282994.pdf

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