Cappellari, Lorenzo. 2004. "The Dynamics and Inequality of Italian Men's Earnings: Long-term Changes or Transitory Fluctuations?" Journal of Human Resources 39(2): 475-499.
This paper provides a longitudinal perspective on changes in Italian men's earnings inequality since the late 1970s by decomposing the earnings autocovariance structure into its long-term and transitory parts. Cross-sectional earnings differentials grew over the period and the longitudinal analysis shows that such growth was determined by the long-term earnings component. Using parameter estimates to analyze low-pay probabilities shows that low-pay persistence and the probability of repeated low-pay episodes grew for all birth cohorts during the early 1990s. Moreover, long-term heterogeneity is found to characterize the earnings distribution of nonmanual workers, accounting for a large part of overall heterogeneity.
Lorenzo Cappellari is an assistant professor of economic policy at the Universitą del Piemonte Orientale and a research fellow at the Institute for the Study of Labor (Bonn). The author is indebted to Stephen Jenkins and Mark Stewart for support and advice throughout the research. He also thanks Wiji Arulampalam, Martin Biewen, Carlo Dell' Aringa, Claudio Lucifora and Xavi Ramos for helpful conversations and two anonymous referees for providing remarks that led to substantial improvements of the paper. Participants at ESEM 1998, EALE 1998, the 10th International Conference on Panel Data, the Income Distribution and Welfare workshop held at the Universitą Bocconi and seminars at the University of Essex, the Policy Studies Institute and the Universitą Cattolica in Milan provided useful comments. The author gratefully acknowledges data availability from the Instituto Nazionale di Previdenza Sociale and financial support from the Nuffield Foundation (New Career Development Fellowship held at the Institute for Social and Economic Research, University of Essex) and Regione Piemonte (Ricerche di Eccellenza). Usual disclaimers apply. The data used in this article can be obtained October 2004 through September 2007 from Lorenzo Cappellari, Dipartimento di Scienze Economiche e Metodi Quantitativi, Universitą del Piemonte Orientale, Via Perrone 18, 28100, Novara, Italy; e-mail: lorenzo.cappellari@eco.unipmn.it.