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Heterogeneity and Wage Inequalities over the Life Cycle

Thierry Magnac () and Sébastien Roux ()

No 19-1041, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Using panel data from a single cohort of French male wage earners observed over a long span of 30 years starting at their entry in the labor market, we estimate parameters of a human capital investment model by random and fixed effect methods. Individual wage proles are described by their individual-specific level, slope and curvature. This allows a fine decomposition of the variance of (log-)wages at different times of the life-cycle and in the long run. Among salient results, short run time-varying inequalities are shown to be larger that long run inequality by a factor of 20% to 80%. Individual permanent heterogeneity explain between 60 to 90% of the variance of wages. Single dimensional heterogeneity explains well those variances at a point in time but not over the whole period or in the long run. Multidimensional heterogeneity is needed and in particular under the form of a horizon individual effect.

JEL-codes: C33 D91 I24 J24 J31 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-eur and nep-lma
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Working Paper: Heterogeneity and Wage Inequalities over the Life Cycle (2020) Downloads
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