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Modelling earnings dynamics and inequality: foreign workers and inequality trends in Luxembourg, 1988–2009

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  • Denisa M. Sologon
  • Philippe Van Kerm

Abstract

The paper exploits large‐scale administrative data to analyse trends in male earnings inequality in Luxembourg during 20 years of rapid economic growth, industrial redevelopment and massive inflow of foreign workers. A detailed error components model is estimated to identify persistent and transitory components of (the trends of) log‐earnings variance and to disentangle the contributions to it of native, immigrant and cross‐border workers. The model is flexible and allows for a high degree of individual, age, time and cohort heterogeneity. We observe a surprising stability in overall earnings inequality as a result of more complex underlying changes, with marked increases in persistent inequality (except among natives), a growing contribution of foreigners and a decrease in earnings instability (primarily for natives).

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  • Denisa M. Sologon & Philippe Van Kerm, 2018. "Modelling earnings dynamics and inequality: foreign workers and inequality trends in Luxembourg, 1988–2009," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 181(2), pages 409-440, February.
    • Handle: RePEc:bla:jorssa:v:181:y:2018:i:2:p:409-440
    DOI: 10.1111/rssa.12303
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    Cited by:

    1. Yuri Ostrovsky, 2020. "Testing functional forms of the lifetime income process in the presence of factor loadings," Empirical Economics, Springer, vol. 59(1), pages 1-10, July.
    2. Silvia Avram & Mike Brewer & Paul Fisher & Laura Fumagalli, 2022. "Household Earnings and Income Volatility in the UK, 2009–2017," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(2), pages 345-369, June.

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