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The Dynamics of Earnings in Chile

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  • Cristóbal Huneeus
  • Andrea Repetto

Abstract

This paper provides an empirical analysis of individual earnings using data from the Encuesta Suplementaria de Ingresos. We find that the predictable component of income is hump-shaped over the life-cycle, and that there are strong education effects. The unpredictable component of income can be described by a very persistent permanent shock and a transitory shock. Our estimates are built from a panel of cohorts, so we use US data from the PSID to provide a magnitude for the underestimation of the estimated variances. Surprisingly, we find that the variance of the permanent shock is almost 4 times smaller in Chile than in the US, a result, perhaps, of the relative rigidity of the Chilean labor market.

Suggested Citation

  • Cristóbal Huneeus & Andrea Repetto, 2004. "The Dynamics of Earnings in Chile," Documentos de Trabajo 183, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:183
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    Cited by:

    1. Paulina Granados Z., 2004. "Income Function of Chilean Households: Life Cicle and Persistence of Shocks," Working Papers Central Bank of Chile 257, Central Bank of Chile.
    2. Jorge E. Restrepo & Andrea Tokman R., 2005. "Labor Markets and Institutions: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.),Labor Markets and Institutions, edition 1, volume 8, chapter 1, pages 001-016, Central Bank of Chile.
    3. Jose Cuesta & Hugo Ñopo & Georgina Pizzolitto, 2011. "Using Pseudo‐Panels To Measure Income Mobility In Latin America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(2), pages 224-246, June.
    4. Sánchez Martín, A. & Jiménez Martín, S. & Robalino, D. & Todeschini, F., 2012. "Labor Income and the Design of Default Portfolios in Mandatory Pension Systems: An Application to Chile," Working Papers 2012-04, FEDEA.
    5. Hugo Ñopo & Giorgina Pizzolitto & José Cuesta, 2007. "Usando pseudopaneles para medir la movilidad del ingreso en América," Research Department Publications 4558, Inter-American Development Bank, Research Department.
    6. Carlos Madeira, 2015. "Identification of Earning Dynamics using Rotating Samples over Short Periods: The Case of Chile," Working Papers Central Bank of Chile 754, Central Bank of Chile.
    7. Paulina Granados Z., 2004. "Chilean Household Income Function: Life Cycle and Persistence of Shocks," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(1), pages 51-89, April.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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