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Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation
Author(s) -
Andersson Fredrik,
Davis Elizabeth E.,
Freedman Matthew L.,
Lane Julia I.,
Mccall Brian P.,
sandusky Kristin
Publication year - 2012
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/j.1468-232x.2012.00697.x
Subject(s) - earnings , inequality , sorting , economics , labour economics , census , demographic economics , accounting , population , mathematical analysis , mathematics , demography , sociology , computer science , programming language
This study exploits longitudinal employer–employee matched data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in earnings inequality within and across industries between 1992 and 2003. We find that factors that cannot be measured using standard cross‐sectional data, including the entry and exit of firms and the sorting of workers across firms, are important sources of changes in earnings distributions over time. Our results also suggest that the dynamics driving changes in earnings inequality are heterogeneous across industries.