Earnings dynamics and inequality in Venezuela1995-1997

Resumo

In this paper, we decompose the variance of logarithmic monthly earnings of prime age males into its permanent and transitory components, using a five-wave rotating panel from the Venezuelan 'Encuesta de Hogares por Muestreo' from 1995 to 1997. As far as we know, this is the first time a variance components model is estimated for a developing country. We test several specifications and find that an error component model with individual random effects and first order serially correlated errors fits the data well. In the simplest model, around 22% of earnings variance is explained by the variance of permanent component, 77% by purely stochastic variation and the remaining 1% by serial correlation. These results contrast with studies from industrial countries where the permanent component is predominant. The permanent component is usually interpreted as the results of productivity characteristics of individuals whereas the transitory component is due to stochastic perturbations such as job and/or price instability, among others. Our findings may be due to the timing of the panel when occurred precisely during macroeconomic turmoil resulting from a severe financial crisis. The findings suggest that earnings instability is an important source of inequality in a region characterized by high inequality and macroeconomic instability.

Ficha do documento

Tipo

Estudo

Ano

2002

Instituição

Escola de Pós-Graduação em Economia da FGV

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/12615

Temas

Economia

Palavras-chave

Components of variance modelsEarnings inequalityEarnings dynamicsLatin AmericaEconomiaSalários - Modelos econométricos