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Earnings and Labor Market Dynamics: Indirect Inference Based on Swedish Register Data

Johan Holmberg ()
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Johan Holmberg: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden,

No 984, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: In this paper, we present a life-cycle earnings dynamics model including endogenous employment and job change. The model is estimated with the method of indirect inference using Swedish register data. By simulating data from this microeconomic model, we study the macroeconomic consequences of transitory shocks to unemployment risk. The results show that transitory aggregate shocks to unemployment risk have long-lasting negative effects on employment, income, and increases earnings volatility. By studying how unemployment at different ages affects the accumulation and distribution of pension entitlements, we find that becoming unemployed at 40 has the largest effect on pension accumulations. Furthermore, unobserved individual heterogeneity contributes substantially to the observed life-cycle earnings inequality for both men and women in Sweden.

Keywords: Earnings dynamics; unemployment; inequality; social insurance; pensions (search for similar items in EconPapers)
JEL-codes: D63 E27 H55 J24 J64 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021-01-19
New Economics Papers: this item is included in nep-age, nep-dge, nep-eur, nep-lab and nep-mac
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Handle: RePEc:hhs:umnees:0984