Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations?
Doris, Aedin and O'Neill, Donal and Sweetman, Olive (2010) Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations? NUI Maynooth.
This paper examines the relationship between aggregate inequality and its underlying components for a number of European countries. We use a well established GMM approach to separate the permanent component from the transitory component of earnings inequality. Our results show that three quarters of the observed cross-country differences in aggregate inequality in Europe is accounted for by differences in permanent inequality, reflecting differences in individual characteristics that persist throughout the life-cycle.
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