Permanent and transitory wages of British men, 1975–2001: year, age and cohort effects

Abstract

SUMMARYWe examine the mean and variance-covariance structure of log-wages over calendar time and the life cycle of British men, hereby controlling for birth cohort effects. We attribute the strong increase in mean log-wage during the 1980s and 1990s to a rise in mean log-wage with the year of birth. This rise is diminishing with the year of birth, which implies lower wage inequality between cohorts with the year of birth. Wage inequality has increased during the 1980s and early 1990s and remained fairly stable in the second half of the 1990s. The year effects, however, show increasing wage inequality up to 2001, mainly due to a strong rise in transitory wage inequality. Transitory wages are strongly correlated over time and an increase in transitory wage inequality therefore has highly persistent inequality consequences. The stable wage inequality in the second half of the 1990s is attributed to lower within-cohort wage inequality for the younger cohorts. The age effects show that permanent wage inequality increases with age, in particular up to age 30 and over age 50.

Post-Schooling Human Capital Investments and the Life Cycle of Earnings

“…The same speci…cation has also been estimated by Abowd and Card (1989), Mo¢ t and Gottschalk (1995, Kalwij and Alessie (2007) although there are variations in the orders of ARMA processes which are used in those papers. Baker (1997) was the …rst to compare the performance of random growth and random walk models.…”

Modelling Earnings Dynamics and Inequality: Foreign Workers and Inequality Trends in Luxembourg, 1988–2009

“…In Canada, most of the increase in earnings instability occurred during the early 1980s and early 1990s (Baker and Solon, ). Across Europe, a strong increase in transitory inequality was found by Kalwij and Alessie () in the UK, by Cappellari and Leonardi () in Italy, and by Bönke et al . () in Germany.…”

“…() in Germany. In the UK, whereas Kalwij and Alessie () found that transitory inequality increased to a larger extent than permanent inequality, Dickens () found similar increases in both components. The difference was attributed to the methodological advancements that were brought by Kalwij and Alessie () which account for age, time and cohort effects in their model specification (see Section ).…”

“…(), Moffitt and Gottschalk () and DeBacker et al . () on the USA, Baker and Solon () on Canada, Dickens () and Kalwij and Alessie () on the UK, Cappellari () and Cappellari and Leonardi () on Italy, Bingley et al . () on Denmark and Bönke et al .…”

Age–period–cohort decompositions using principal components and partial least squares

“…The DP method has been widely applied to empirical studies [8][9][10]. The purpose of this paper is to propose new identification methods and to compare the finitesample performances between the proposed methods and the DP method using Monte Carlo simulations.…”