Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2008:14: A Longitudinal Analysis of Within-Education-Group Earnings Inequality

Magnus Gustavsson ()
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Magnus Gustavsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: Using a large Swedish longitudinal database for the period 1982–2005, I estimate and compare within-group inequality in persistent and transitory earnings among men with high-school and college degrees. Analyses of inequality over the life cycle reveal that experience-variance profiles of persistent earnings are very similar across the two education groups and also consistent with standard human capital models of on-the-job training. Transitory earnings shocks display a marked U-shaped variance pattern over the life-cycle for both groups, but are clearly larger for high-school graduates and also account for a larger proportion of their overall variance. Analyses of changes in within-group inequality over time, holding life-cycle effects constant, show that high-school and college graduates have been subject to similar trend growths in both persistent and transitory earnings differentials between 1982 and 2005.

Keywords: Permanent inequality; Earnings instability; Life-cycle earnings; Schooling

JEL-codes: C33; D31; J39

26 pages, December 5, 2008

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