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Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations?

Aedín Doris (), Donal O'Neill () and Olive Sweetman

Economics, Finance and Accounting Department Working Paper Series from Department of Economics, Finance and Accounting, National University of Ireland - Maynooth

Abstract: This paper examines the relationship between aggregate inequality and its underlying components for a number of European countries. We use a well established GMM approach to separate the permanent component from the transitory component of earnings inequality. Our results show that three quarters of the observed cross-country differences in aggregate inequality in Europe is accounted for by differences in permanent inequality, reflecting differences in individual characteristics that persist throughout the life-cycle.

Keywords: Permanent Inequality; Transitory Inequality; Generalized Method of Moments; Covariance Structure of Earnings (search for similar items in EconPapers)
JEL-codes: J31 D31 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2010
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Citations: View citations in EconPapers (4) Track citations by RSS feed

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