What Explains Lifetime Earnings Differences Across Individuals?

Jose Mustre-del-Rio and Emily Pollard

Economic Review, 2019, issue Q I, 35-56

Abstract: Expected lifetime earnings are a key factor in many individual decisions, such as whether or not to go to college and what kind of occupation to pursue. However, lifetime earnings differ widely across individuals, and uncovering the factors that explain these differences can be challenging. Some characteristics, such as race and sex, are observable. But other intangible characteristics, such as work performance, are more difficult to quantify. To what degree observable characteristics explain lifetime earnings is an empirical question. {{p}} Jos Mustre-del-Ro and Emily Pollard use a unique data set combining administrative and survey data to assess how much variation in lifetime earnings across individuals can be explained by observable characteristics such as sex, race, education, and labor market experience. They find that labor market experience?that is, the fact that some individuals work more years than others?accounts for roughly 40 percent of the difference in earnings. Standard demographic characteristics such as sex, race, or education alone explain about 15 percent of these differences. In total, observable characteristics account for a little more than half of lifetime earnings differences.

JEL-codes: E20 E24 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.kansascityfed.org/documents/576/2019-W ... 20Individuals%3F.pdf (application/pdf)
https://kansascityfed.org/research/economic-review ... s-lifetime-earnings/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedker:00074

Ordering information: This journal article can be ordered from

DOI: 10.18651/ER/1q19Mustre-del-Rio-Pollard

Access Statistics for this article

More articles in Economic Review from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().