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Changes in the Distribution of Earnings Volatility

Changes in the Distribution of Earnings Volatility <p>Recent research has documented a rise in the volatility of individual labor earnings in the United States since 1970. Existing measures of this trend abstract from within-group latent heterogeneity, effectively estimating an increase in average volatility for observable groups. We decompose this average and find no systematic rise in volatility for the vast majority of individuals. Increasing average volatility has been driven almost entirely by rising earnings volatility of those with the most volatile earnings, identified ex ante by large past earnings changes. We characterize dynamics of the volatility distribution with a nonparametric Bayesian stochastic volatility model from Jensen and Shore (2011).</p> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Changes in the Distribution of Earnings Volatility

Journal of Human Resources , Volume 50 (3) – Aug 9, 2015

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Publisher
University of Wisconsin Press
Copyright
©by the Board of Regents of the University of Wisconsin System
ISSN
1548-8004

Abstract

<p>Recent research has documented a rise in the volatility of individual labor earnings in the United States since 1970. Existing measures of this trend abstract from within-group latent heterogeneity, effectively estimating an increase in average volatility for observable groups. We decompose this average and find no systematic rise in volatility for the vast majority of individuals. Increasing average volatility has been driven almost entirely by rising earnings volatility of those with the most volatile earnings, identified ex ante by large past earnings changes. We characterize dynamics of the volatility distribution with a nonparametric Bayesian stochastic volatility model from Jensen and Shore (2011).</p>

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Aug 9, 2015

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