NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004

Robert A. Moffitt, Peter Gottschalk

NBER Working Paper No. 16833
Issued in February 2011
NBER Program(s):   PE

We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but only approximate methods, we find that the transitory variance started to increase in the early 1970s, continued to increase through the mid-1980s, and then remained at this new higher level through the 1990s and beyond. Thus the increase mostly occurred about thirty years ago. Its increase accounts for between 31 and 49 percent of the total rise in cross-sectional variance, depending on the time period.

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Document Object Identifier (DOI): 10.3386/w16833

Published: T re nds in th e T ra nsi tor y Var ia nce of Ma le Ear nin gs in t he U.S ., 19 70- 2004 . J our nal of Hum an Re sou rc es, Wi nte r, 2 012.

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