Individual Earnings and Family Income: Dynamics and Distribution

Joseph Altonji, Disa M. Hynsjö and Ivan Vidangos

No 30095, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We review research on the dynamics and distribution of individual earnings and family income. We start with univariate earnings models, which dominate the literature and are often used as the exogenous component of family income in structural models of saving. We present a version of the linear model that nests most of the specifications that have been used in the literature, and then discuss recent papers that stress nonnormal shocks, nonlinear and age-dependent processes, and heterogeneous model parameters. The recent work provides a much richer description of the nature of earnings volatility than the basic model. We then turn to models of individual earnings that are based on wages, employment, job mobility, and hours. These multivariate models permit measuring the sources of permanent differences in earnings and distinguishing among shocks that influence earnings through employment, job mobility, general productivity, or hours. Finally, we consider models of lifetime family income that integrate individual earnings, marriage (accounting for marital sorting), and earnings of a spouse (if present). We conclude by discussing directions for future work.

JEL-codes: D31 J16 J24 J31 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-lma and nep-ltv
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Published as Joseph G. Altonji & Disa M. Hynsjo & Ivan Vidangos, 2022. "Individual Earnings and Family Income: Dynamics and Distribution," Review of Economic Dynamics, .

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Journal Article: Individual Earnings and Family Income: Dynamics and Distribution (2023)
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