Heterogeneity and Wage Inequalities over the Life Cycle

Abstract

Using panel data from a single cohort of French male wage earners observed over a long span of 30 years starting at their entry in the labor market, we estimate parameters of a human capital investment model by random and fixed effect methods. Individual wage proles are described by their individual-specific level, slope and curvature. This allows a fine decomposition of the variance of (log-)wages at different times of the life-cycle and in the long run. Among salient results, short run time-varying inequalities are shown to be larger that long run inequality by a factor of 20% to 80%. Individual permanent heterogeneity explain between 60 to 90% of the variance of wages. Single dimensional heterogeneity explains well those variances at a point in time but not over the whole period or in the long run. Multidimensional heterogeneity is needed and in particular under the form of a horizon individual effect.

JEL codes

Replaced by

Thierry Magnac, and Sébastien Roux, “Heterogeneity and Wage Inequalities over the Life Cycle”, European Economic Review, vol. 134, n. 103715, May 2021.

Reference

Thierry Magnac, and Sébastien Roux, “Heterogeneity and Wage Inequalities over the Life Cycle”, TSE Working Paper, n. 19-1041, October 2019, revised March 2021.