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Title:Earnings dynamics and inequality among men in Luxembourg, 1988 - 2004: Evidence from administrative data PDF Logo
Authors:Sologon, Denisa Maria
O'Donoghue, Cathal
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5014
Abstract:Starting with the late 1980s and intensifying after early 1990s, Luxembourg evolved from an industrial economy to an economy dominated by the tertiary sector, which relies heavily on the cross-border workforce. This paper explored the implications of these labour market structural changes for the structure of earnings inequality and earnings mobility. Using an extraordinary longitudinal dataset drawn from administrative records on professional career, we decomposed Luxembourg's growth in earnings inequality into persistent and transitory components and explored the extent to which changes in cross-sectional earnings inequality between 1988 and 2004 reflect changes in the transitory or permanent components of earnings. Thanks to the richness of the Luxembourgish data set, we are able to estimate a much richer model that nests the various specifications used in the US, Canadian and European literature up to date, thus rejecting several restrictions commonly imposed in the literature. We find that the growth in earnings inequality reflects an increase in long-term inequality and a decrease in earnings instability, and is accompanied by a decrease in earnings mobility. Thus in 2004 compared with 1988, low wage men in Luxembourg are worst off both in terms of their relative wage and in terms of their opportunity of improving their relative income position in a lifetime perspective.
Subjects:Panel data
wage distribution
inequality
mobility
JEL:C23
D31
J31
J60
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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