The Covariance Structure of Earnings and Income, Compensatory Behavior, and On-the-Job Investments

J R Kearl

The Review of Economics and Statistics, 1988, vol. 70, issue 2, 214-23

Abstract: The covariance between income and income growth for data from nineteenth-century Uta h is negative. An extended covariance model, estimated with earnings and income data, suggests that the degree of concavity of the age-ear nings (age-income) profile is associated with initial earnings (incom e) and the growth in earnings (income): those with lower initial earn ings (incomes) have higher rates of growth, but more concave age-rela ted profiles. These findings are consistent with a human capital inte rpretation of the earnings (income) profile and imply that there is m ore rapid depreciation of human capital obtained through on-the-job t raining than through other sources. Copyright 1988 by MIT Press.

Date: 1988
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