We develop a search model that focuses on the expected result of search. The model focuses on four conceptually different steps which are taken in changing jobs. First, the person is either voluntarily or involuntarily terminated. Second, the person who decides to quit (or who is involuntarily terminated with prior notification) chooses whether to search on the job or full time (i.e., by becoming unemployed). Third, as each job offer is received, the person decides either to accept it or to continue searching for a better offer. The fourth step occurs after the person has evaluated the "experience-good" aspects of the job. At that point he or she can determine whether the new job is better than the previous job. The question we ask is whether the type of termination and/or the experience of unemployment affects the probability that the person will find the new job preferable to the previous job. The model predicts that the type of termination will affect the probability of moving to a better job but the experience of unemployment will not. This prediction is verified using 1978-79 data from the PSID to estimate a bivariate probit model.

This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution.

Measures of inequality and mobility based on self-reported earnings reflect attributes of both the joint distribution of earnings across time and the joint distribution of measurement error and earnings. While classical measurement error would increase measures of inequality and mobility, there is substantial evidence that measurement error in earnings is not classical. In this paper, we present the analytical links between nonclassical measurement error and some summary measures of inequality and mobility. The empirical importance of nonclassical measurement error is explored using the Survey of Income and Program Participation (SIPP) matched to tax records. We find that the effects of nonclassical measurement error are large. However, these nonclassical effects are largely offsetting when estimating mobility, as measured by the intertemporal correlation in earnings. As a result, SIPP estimates of the correlation are similar to estimates based on tax records, though SIPP estimates of inequality are smaller than estimates based on tax records.

This paper uses data from the Luxembourg Income Study to explore the role of differences in supply shifts in explaining cross-national differences in the rise in earnings inequality. Changes in returns to age and education are estimated for eight countries using a common specification of earnings functions across years and countries. We find that the small overall increase in earnings inequality in many countries reflects large but offsetting changes in returns to skill and changes in inequality within age education cells. Furthermore, these differences in returns to skill can largely be explained by differences in supply shifts.

This paper examines the driving forces of family income dynamics by developing a unified framework to estimate permanent and transitory variation in head earnings, spouse earnings, and transfer income, as well as permanent and transitory correlations between these income sources. A complete decomposition using the PSID 1970–2018 shows that transitory variation in head earnings alone accounts for more than half of the total family income inequality. Insurance against transitory shocks to head earnings comes primarily from transfer income rather than spouse earnings. Both permanent and transitory variations in spouse earnings have an equalizing effect on family income inequality.

William J. Wilson (1978, 1985, 1986) has hypothesized that the combination of increased spatial concentration and increased inequality of income among blacks has caused adverse behavioral consequences for poor blacks and contributed to the development of an underclass. Lessening segregation and the general rise in black economic well-being in the postwar period enabled middle-income blacks to move out of segregated inner-city neighborhoods. As a result, low-income blacks in these areas now rarely come in contact with middle-class blacks, who had previously influenced social organizations and community institutions, and provided role models of economic and social success. Wilson hypothesizes that poor blacks have changed their labor force and family behaviors because of the social and economic consequences of this selective outmigration. Wilson's hypothesis has both an empirical and a causal component. In this paper we focus primarily on the former. In the first two sections, we review changes in the level and distribution of male earnings, and in the spatial concentration of poverty. The trends for blacks are compared to those for whites. The third section discusses the links between the empirical evidence and the causal component-did these changes lead to behavioral responses that contributed to the development of an underclass?

In the past ten years, discussions of the system and reform have increasingly been concerned with the extent of welfare dependence. However, while the idea that some individuals may be dependent upon the system for support is intuitively clear, the concept of dependence is rather ill-defined. Our aims in this paper are to clarify what is meant by dependence; to discuss the implications for data handling, measurement, and statistical modeling; and to present new results on the level and trend in dependence in the United States.

Discussions about the antipoverty effects of economic growth in the United States have largely been predicated on John Kennedy's metaphor that a rising tide lifts all boats. But the magnitude of these effects has been a subject of debate since the inception of the War on Poverty (see Lowell Gallaway, 1965, and Henry Aaron, 1967). This debate has public policy as well as academic implications-the greater the antipoverty effectiveness of growth, the less the need for special programs or income supplements during economic expansions. Elsewhere, we have shown that increased real income need not be associated with a decline in poverty (see our 1984 and 1985 papers). In fact, poverty rates did not fall from 1982 to 1983, even though real median income increased. And in 1984 the official poverty rate was about the same as it was in 1967, while real median family income was 7.1 percent above its 1967 level.' If a rising tide was lifting all boats, the tide was late in many harbors. In this paper we examine the relationship between macroeconomic conditions and poverty. Section I argues that several factors now limit the effectiveness of growth in reducing poverty. Section II differentiates the effects of secular economic growth from those of cyclical recoveries. The next section presents our interpretation of the data, followed by a brief conclusion. We show that growth had a large antipoverty effect through the early 1970's, but that the more recent experience has been different because growth rates have slowed and inequality has increased.