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Introducing Unobserved Heterogeneity in Earnings Mobility

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  • Thibault Brodaty

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper introduces and describes unobserved heterogeneity in earnings quintiles transition matrices in the US. Unobserved heterogeneity is found to play a crucial role in earnings mobility. Each individual is attracted, given his characteristics, towards a specific zone of the distribution. At the stationnary equilibrium, the earnings quintiles distribution is thus segmented. Interestingly, while the level of earnings mobility has remained quite stable since 1970, the width of these zones has decreased, such that this segmentation was more pronounced in the 80's and the 90's than in the 70's, especially in the middle of the quintiles distribution.

Suggested Citation

  • Thibault Brodaty, 2007. "Introducing Unobserved Heterogeneity in Earnings Mobility," Post-Print halshs-00250130, HAL.
    • Handle: RePEc:hal:journl:halshs-00250130
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00250130
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    Keywords

    earnings mobility; unobserved heterogeneity; segmentation; state dependence; dynamic multinomial logit;
    All these keywords.

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