For birth cohorts 1935–44, 1945–62, and 1964–74, we estimate the contribution of education; permanent heterogeneity in wage rates, employment, and hours; labor market shocks; spouse characteristics and shocks; nonlabor income shocks; and marital histories to the age profiles of the variance of family income per adult equivalent. The decompositions are based upon PSID data and Altonji, Giraldo-Páez, Hynsjö, and Vidangos’ (2024) statistical model of earnings, marriage, marital sorting, fertility, and nonlabor income. We find that education and employment heterogeneity are key sources of the rise in the variance with age and across birth cohorts. Hours shocks have grown in importance for women, and employment shocks have grown in importance, especially for men after age 30. The variance contribution of wage heterogeneity is substantial at all ages and has risen across cohorts for women. Own characteristics and shocks matter more for men than women, while spouse characteristics and shocks matter more for women. Gender differences have declined across cohorts.
Authors
Joseph Altonji, Daniel Giraldo Páez, Disa M. Hynsjö, Ivan Vidangos
- Acknowledgements & Disclosure
- Our brilliant and kind co-author, Disa Hynsjö, passed away in July 2021 after a sudden illness. We mourn her passing. Our research has been supported by the Cowles Foundation, the Tobin Center for Economic Policy, and the Economic Growth Center, Yale University (Altonji). This work was supported in part by the facilities and staff of the Yale University Faculty of Arts and Sciences High Performance Computing Center, and by the National Science Foundation under grant #CNS 08-21132 that partially funded acquisition of the facilities. We thank Paula Calvo, Luigi Guiso, Costas Meghir, Robert Pollack, Kjell Salvanes, participants in the Conference in Honor of Robert Moffitt (Johns Hopkins, 2022), the editor, and two anonymous referees for helpful comments. We also thank Serena Goldberg, Mona Mahadevan, Lucas Marron, Eleri Phillips, and Owen Rask for excellent research assistance. The views expressed in the paper are our own and do not necessarily represent the views of the Federal Reserve Board, Yale University, NBER, IZA, or other members of their staffs. We are responsible for the remaining shortcomings of the paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33122
- Pages
- 137
- Published in
- United States of America
Table of Contents
- 1 Introduction 3
- 2 Data 8
- 2.1 Definitions of Main Variables 8
- 3 A Model of Earnings Marriage and Family Income Across 10
- Cohorts 10
- 3.1 Initial Conditions at Age 25 11
- 3.2 Earnings 12
- 3.3 Nonlabor Income and Family Income Per Adult Equivalent 15
- 3.4 Marriage 16
- 3.5 Spouse Characteristics at the Start of a Marriage 17
- 3.6 Fertility after Age 25 19
- 3.7 Some Limitations of the Model and Estimation Strategy 20
- 3.8 Model Fit 20
- 4 Using Simulated Data to Summarize the Effects of Personal 21
- Characteristics and Spouse Characteristics on Earnings and 21
- Income 21
- 5 Variance Decompositions of Family Income by Age Cohort 24
- 5.1 Variance Decomposition Methods 25
- 5.2 Variance Decompositions by Age 26
- 5.3 Cohort Differences in the Variance Decompositions 29
- 5.4 The Contribution of Marital Sorting to Inequality 36
- 6 Concluding Remarks 36
- References 38
- Earnings Marriage and the Variance of 53
- Family Income by Age Gender and Cohort 53
- Online Appendix 53
- Supplemental Material. For Online Publication 53
- Only 53
- Appendix Table of Contents 54
- Appendix A Data Appendix 54
- Appendix B Model Estimates 54
- Appendix C Model Fit Appendix 54
- Appendix D Additional Regressions Using Simulated Data 54
- Appendix E Additional Variance Decomposition Tables and Figures 54
- Appendix A Data Appendix 55
- Appendix A.1 Sample Selection 55
- Appendix A.2 Notation and Demographic Variables 56
- Appendix A.3 Wages Hours and Earnings 56
- Appendix A.4 Employment Status 57
- Appendix A.5 Marriage and Children 58
- Appendix A.6 Nonlabor Income Family Income and Adult Equivalence 59
- Earnings Hours 60
- Married 60
- Earnings Hours Married 60
- Married 60
- Earnings Hours 61
- Married 61
- Earnings Hours Married 61
- Married 61
- Earnings Hours 62
- Married 62
- Earnings Hours Married 62
- Married 62
- Appendix B Model Estimates 63
- B.1 Estimating the distribution of employment marriage and number of 63
- B.2 Estimating the variances of the wage error components 64
- B.3 Estimation of the Hours Model 66
- B.4 Estimation of Sorting Parameters for Wage Error Components 66
- B.5 Choice of Measurement Error Variance Values 67
- Appendix C Model Fit 90
- C.1 Means Standard Deviations and Age Profiles of Key Variables 90
- C.2 Dynamic Fit of the Model 92
- Appendix D Additional Regressions Using Simulated Data 112
- Appendix E Additional Variance Decomposition Tables and Fig- 116
