Working Paper Series, Department of Economics, Uppsala University
No 2004:11:
Trends in the Transitory Variance of Earnings: Evidence from Sweden 1960-1990 and a Comparison with the United States
Magnus Gustavsson ()
Abstract: I decompose the cross-sectional variance of male annual
earnings in Sweden between 1960 and 1990 into permanent and transitory
components. The transitory variance increased until the early 1970s,
declined during the remainder of the decade and then rose again during the
second half of the 1980s. The permanent variance declined over the whole
sample period but its decrease was much more rapid up until the early 1980s
than afterwards. Comparing the results for the transitory variance with
evidence from the U.S. reveals sharp differences. Most notably, the
transitory variance of U.S. earnings rose sharply from the mid 1970s to the
mid 1980s. An important explanation for these dissimilarities appears to be
labor market institutions. In particular, it is likely that centralized
solidarity bargaining in Sweden imposed constraints on earnings instability
during the 1970s and early 1980s.
Keywords: Earnings dynamics; Earnings inequality; Panel data; (follow links to similar papers)
JEL-Codes: C33; D31; J39; (follow links to similar papers)
63 pages, June 8, 2004
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- This paper is published as:
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Gustavsson, Magnus, (2008), 'A New Picture of Swedish Earnings Inequality: Persistent and Transitory Componentswith the United States', Review of Income and Wealth, Vol. 54, No. 3, pages 324-349
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