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The Covariance Structure of Intrafamily Earnings, Rising Inequality and Family Labor Supply

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  • Dean Hyslop

    (Princeton University)

Abstract

This paper uses longitudinal survey data to analyse the relationship between recent increases in individual wage inequality, and individual and family earnings inequality. The analysis compares the implications of a model of intertemporal family labor supply, to those of a model with no behavioral content. The results imply that the fraction of family earnings variance attributable to permanent wage differences is about 70 percent, and remained constant as the total variance of earnings increased during the 1980's. The parameter estimates imply the intertemporal labor supply for males is zero, and for females is about 0.4. The net contribution of behavioral responses to increasing wage inequality reduced the level of family earnings inequality by 14 percent.

Suggested Citation

  • Dean Hyslop, 1994. "The Covariance Structure of Intrafamily Earnings, Rising Inequality and Family Labor Supply," Working Papers 718, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:339
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    Cited by:

    1. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, vol. 91(4), pages 778-794, September.
    2. Dean Hyslop, 2000. "A Preliminary Analysis of the Dynamics of Individual Market and Disposable Incomes," Treasury Working Paper Series 00/15, New Zealand Treasury.

    More about this item

    Keywords

    earnings inequality; labor supply;

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • B11 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Preclassical (Ancient, Medieval, Mercantilist, Physiocratic)

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