Working Paper: NBER ID: w16833
Authors: Robert A. Moffitt; Peter Gottschalk
Abstract: We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but only approximate methods, we find that the transitory variance started to increase in the early 1970s, continued to increase through the mid-1980s, and then remained at this new higher level through the 1990s and beyond. Thus the increase mostly occurred about thirty years ago. Its increase accounts for between 31 and 49 percent of the total rise in cross-sectional variance, depending on the time period.
Keywords: No keywords provided
JEL Codes: J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| transitory variance (F31) | increase in cross-sectional variance of earnings (J31) |
| economic downturns (F44) | spikes in transitory variance (E32) |
| early 1970s (E65) | increase in transitory variance (E39) |
| mid-1980s (E65) | stabilization of transitory variance at higher level (E63) |