Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings
Journal of Labor Economics
1997
Using U.S. panel data on adult males, I compare the "profile heterogeneity model" of earnings dynamics, in which the earnings/experience profile varies across individuals, to a competing model in which earnings "has a unit root." The latter specification enjoys increasing popularity among researchers. My analysis questions this favor, suggesting the profile heterogeneity model provides a more consistent representation of the data. I also provide new estimates of the variation in earnings growth rates. Previous evidence is from relatively unrepresentative samples. Individuals one standard deviation above the mean enjoy a 20%-30% earnings advantage in just 10 years.
- DOI
- 10.1086/209836
- Volume
- 15 (2)
- Pages
- 338-375
- Language
- en
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