Discussion Paper Details

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Title: Jobs, Workers and Changes in Earnings Dispersion

Author(s): Simon Burgess, Julia Lane and David Stevens

Publication Date: October 1997

Keyword(s): Allocation of Workers, Earnings Inequality, Matched Worker-firm Panels and Within-group Inequality

Programme Area(s): Human Resources

Abstract: The ?fractal? nature of the rise in earnings dispersion is one of its key features and remains a puzzle. This paper offers a new perspective on the causes of changes in earnings dispersion, focusing on the role of labour reallocation. Once we drop the assumption that all firms pay a given worker the same, the allocation of workers to firms matters for the dispersion of earnings. This perspective highlights two new factors that can affect the dispersion of earnings: rates of job and worker reallocation, and the nature of the process allocating workers to jobs. We set out a framework capturing this idea and quantify the impact of reallocation on earnings dispersion, using a dataset which comprises almost the universe of workers and the universe of employers in Maryland. We show that these factors have potentially large effects in general on earnings dispersion. In the case of Maryland over the period 1985?94, the changing allocation of workers to jobs played a significant role in explaining movements in the dispersion of earnings.

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Bibliographic Reference

Burgess, S, Lane, J and Stevens, D. 1997. 'Jobs, Workers and Changes in Earnings Dispersion'. London, Centre for Economic Policy Research.