Wages and hours in earnings dynamics

by Lee A. Lillard

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback25 pages $20.00 $16.00 20% Web Discount

Explores the relative importance of wages, hours worked, and labor supply in earning inequality and earning mobility using a model of earnings dynamics. The model emphasizes permanent and transitory sources of each. The model is dynamic in that the wage function and the labor supply (hours worked) function each incorporate a permanent component partially due to observed worker characteristics, an autoregressive transitory component and a serially uncorrelated component. The estimated relationships also account for measurement error. The results indicate that (1) labor supply plays a relatively minor role in either earning inequality or earning mobility, (2) wage variation dominates earnings inequality, especially permanent inequality, and (3) earning mobility, or instability, is largely nonwage related.

This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.